CAC 40 and DAX 30 Gain Today After Last Wek’s Crash

Today’s performance in European equities such as CAC 40 and MIB suggests a tentative recovery from last week’s declines, particularly in France and Italy. However, the overall cautious sentiment and specific declines in Spain indicate that regional and political issues continue to weigh on investor confidence.

European stocks rose today after crashing last week

While concerns over debt and deficits in France have not completely dissipated, the positive closing changes in some indices suggest that investors might be seeing these issues as either priced in or mitigated to some extent. The Stoxx 600’s slight increase and the flat performance of the FTSE 100 indicate a cautiously optimistic market sentiment, with investors potentially waiting for further developments before making significant moves.

CAC Chart Daily – The Crash Has Stopped

ECB’s Chief Economist, Philip Lane, has provided extensive remarks covering various aspects of the current economic and monetary policy outlook:

Key Points from Philip Lane’s Remarks:

  1. Inflation Momentum:
    • Uncertainty: There are still unresolved questions about the momentum of inflation, which won’t be clarified immediately.
    • Timeline: More than a month is needed to gain clarity, suggesting that short-term data might not provide definitive answers.
    • Services Inflation: By July, the ECB might not have a much clearer picture of the momentum in services inflation.
  2. Data-Dependent Approach:
    • Meeting Frequency: Every ECB meeting is a “live one,” indicating that decisions could be made at any time based on new data.
    • Survey Data: The next ECB meeting in July will have a lot of survey data, which will be crucial for their decision-making process.
  3. Policy Flexibility:
    • Surprises and Weakness: If there are positive surprises on inflation or the economy weakens more than expected, the ECB could cut rates more quickly.
    • Euro Currency Movements: Significant movements in the euro would be relevant for policy, particularly concerning the CPI forecast. However, current movements are not deemed substantial.
  4. Rate Impact:
    • Peak Effect: The peak effect of the current rates on inflation hasn’t been realized yet, implying that the full impact of existing policies is still unfolding.
    • Monthly Data Sensitivity: The ECB should not overreact to monthly inflation data, differentiating between short-term noise and long-term signals.
  5. Inflation Dynamics:
    • Wage Increases: Significant wage increases are observed in some countries, contributing to cost pressures.
    • Future Cost Pressures: These pressures are expected to be more muted next year.

German DAX Live Chart

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Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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