European stocks are now under a certain pressure, as investors are wary about further European Central Bank’s monetary policy developments. Traders expect that as Eurozone inflation rises, the regulator will continue to stick to the harsh monetary policy and will further raise rates.
Investors share the fears of even greater global trade protectionism and financial market volatility that have been raised by ECB President Mario Draghi. Moreover, they are upset that the quantitative easing monthly net asset purchase will be halved to 15 billion euros in October and will be ended altogether by December 2018.
Another driver fueling investors’ concerns is the lack of certainty about the US-China trade war prospects along with tenser relationship between Europe and Saudi Arabia. UK officials have begun drawing up a list of Saudi security and government officials who could potentially come under sanctions connected with the disappearance of famous dissident journalist Jamal Khashoggi, who has been missing since he entered the Saudi consulate in Istanbul. The US may come forward with similar sanctions. If this happens, Saudi Arabia global oil supply will be curbed dramatically, and so the oil prices will rise again.
Inside the Eurozone, investors never stopped being worried about the still unresolved and very important Brexit outcomes and conditions including how the Irish border fits into any Brexit deal.
Meanwhile, London and Brussels have little time left to agree a workable Brexit, as they need to reach the withdrawal agreement in November at latest. If they fail, the agreement will not be able to go through the ratification process by March 29, 2019 (the Brexit deadline), which could trigger the ‘hard’ Brexit that would cut off most UK ties with the EU including the agreements, arrangements and regulations it currently observes as a European Union member and cause uncertainty about the future relationship between the United Kingdom and the EU.
Ivan Marchena, Libertex Analyst.