European stocks were rallying on Monday’s trading session as exporters were buoyed by a weak euro. With the effects of Donald Trump’s US presidential election win, the currency has hit its lowest since January against the greenback.
In a note, Marshall Gittler, head of investment research at FxPrimus stated that “The risk-on sentiment continued as market participants warmed to President-elect Trump.”
Based on FactSet data, Stoxx Europe 600 index climbed 1.2% to 341.49, nearing its best level since Oct. 27. As of writing, it is still in the green with a gain of 0.87% or 2.95 to trade at 340.45. Only the utilities and telecoms sectors were losing ground in the index.
In the prior week, the index also soared by 2.6% as it was boosted by gains in the banking, health-care and infrastructure shares on forecasts that these sectors will benefit under a Trump administration. Expectations of higher interest rates in banks will help their profits and mining companies, which have been supporting Trump's promise of major infrastructure spending.
However at the same time, the euro plunged to low levels against the dollar not seen in almost 10 months. The shared currency bought $1.0748, compared with $1.0848 late Friday hours in New York. As of writing, the EUR/USD pair is down 0.86% to trade at 1.0760.
Additionally, the European Central Bank’s head, Mario Draghi, cautioned about the possible repercussions that Trump’s presidency may bring in the approaching monetary stimulus program of the bank. As of present, the Governing council agrees to a monthly asset purchase of €80 billion until the end of March 2017 to bring growth and inflation in the Eurozone. But the qualms over the plan of President Trump in the US economy may delay this new stimulus that the ECB has planned for 2017. The ECB has been vocal in the goal to hold rates at lower levels for a prolonged period. More of this story here in this FSM News forex article: Euro Struggles before Trump Policies.
Pullbacks in the euro’s value can bolster shares in European exporters, as their goods would become less expensive for overseas customers to purchase.
“Trump’s presidency may embolden the anti-euro right on the continent, where there are a number of votes coming up in the next few months (namely Italy, Netherlands, Germany),” Gittler added.
“Some investors have taken into selling EUR/GBP as a result, reasoning that Europe has more problems in the near term than Britain does. This idea too could keep [the pound] underpinned.”
· DAX 30 edged up 1% to 10,771.81.
· CAC 40 jumped 1.2% to 4,541.93.
· FTSE 100 tacked on 1% to 6,796.71.
· IBEX 35 inched higher 0.5% to 8,685.80.
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