European markets bounce back after Manic Monday for investors

“After yesterday’s carnage on the markets with approximately 2% declines seen across Europe, investors are in a better mood as we draw closer to Christmas,” says Russ Mould, Investment Director at AJ Bell.

“Yesterday’s declines were driven by investors getting a cold shower from covid-related setbacks. Optimism had been running high and so the sudden escalation of the new virus variant and subsequent movement and business trading restrictions caught investors off guard.

“The prospect of another nationwide lockdown seems inevitable going into 2021 and so earnings expectations for many industry sectors may have to be downgraded.

“However, it’s comforting to see that the markets haven’t crashed for a second day in a row. That would suggest investors aren’t panicking.

“Tuesday saw European stocks open confidently, with the FTSE 100 up 0.8% to 6,385, and both Germany’s DAX and Spain’s IBEX 35 up 1.3%.

“Asian markets were mixed with India’s BSE Sensex up 0.2% and Japan’s Nikkei down 1%.

“Sterling dipped a further 0.3% against the US dollar to $1.3425 despite talk that progress has been made in terms of the UK striking a deal with the EU on fishing rights.

“US markets overnight were relatively stable, avoiding the gloomy sentiment seen elsewhere thanks to confirmation of the covid stimulus package.

“Overall, it’s been a whirlwind of a year for investors, with chaos in the first quarter and then a dramatic recovery rally that’s taken some markets to all-time highs.

“The covid crisis and Brexit uncertainty look set to hang over equities for the rest of the calendar year and January could be a difficult period unless there is progress in getting the virus under control and clarity on when more people will get vaccinated.”

These articles are for information purposes only and are not a personal recommendation or advice.