Higher ECB Forecasts Push European Stocks Up

ECB building

Raised ECB forecasts led to higher European stocks on Monday. Investors were optimistic about a strong economic recovery in the region after the European Central Bank’s policy decision last week. 

The central bank decided last week to slow down its emergency bond purchases in Q4. Moreover, it raised its growth and inflation projections for 2021 and beyond as Europe’s economy recovered sooner than expected.

ECB President Christine Lagarde stressed, however, that the move wasn’t the start of tapering. This means that their monetary policy will remain accommodative for some time.

With that, investors will await a speech from the Chief Economist Philip Lane set for this week.    

Additionally, they are also looking to the latest inflation reports of the U.K and the U.S. on Tuesday. 

The DAX in Germany traded 0.7% higher at 4 AM ET (0800 GMT). The CAC 40 in France and the U.K.’s FTSE 100 both rose 0.5% each.

EU stocks were up despite losses in Asia earlier Monday. News on a fresh regulatory crackdown on Chinese firms pulled Asian stocks lower. 

Moreover, Soho China (HK:0410), a Chinese property developer, plunged after a takeover deal by Blackstone Group (NYSE: BX) that fell through. At the same time, reports said Beijing is considering breaking up Alipay, Ant Group’s payment app.

 

Relative Price Valuations of Asian Equities at 14-month Low

 

The relative price valuations of Asian equities compared with their global peers are at a nearly 14-month low, data showed, after their bland performance. Worries over slowing growth, coupled with a spread of the COVID-19’s delta variant this year, impacted their numbers.

The MSCI Asia-Pacific index’s forward 12-month P/E ratio was at 14.9. This was in comparison with the MSCI World’s P/E ratio of 18.46. Notably, that near 20% valuation discount is the highest in 14-months, according to data.

This year, the MSCI Asia-Pacific index is up just 3.37%. This is compared with the MSCI United States’ rise of 19.7% and MSCI Europe’s 12.9% this year.

The U.S. Federal Reserve is likely to delay the start of tapering its asset purchases. It is likely to maintain its expansive monetary policy for the near term. However, on these growing hopes, the Asia-Pacific index has gained 4.4% in the past two weeks.

Meanwhile, in a September market sentiment survey published by Deutsche Bank (DE: DBKGn) on Monday, an equity market correction of 5%-10% by the end of 2021 was the majority prediction. With that, the equity bull run will likely end.

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