European Equity Markets Brace for a Shocking Week, Fueled by Economic Anxiety and Resilient Data

ECB's Potential Hike Faces Limited Rate Upside as Macro Headwinds Persist

It’s been a shocking week for European equity markets, on course to shed almost 5% and it could get worse if the US jobs report reflects what we saw yesterday from ADP.

You wouldn’t always guess it when looking at the performance of stocks but there is mounting anxiety about the resilience of the economy and what that will mean for interest rates going into the end of this year and 2024.

Investors always seem to find a way to look on the bright side which may explain the disconnect between economic fears on the back of rapidly rising interest rates and the performance of indices. And that may be rewarded if central banks can achieve the soft landing they’re hoping for but with every piece of resilient data and additional rate hike, that’s looking harder and harder. And you can see it reflected in their language more and more.

That’s not to say investors have suddenly turned bearish on the basis of this week, although it has been quite a sharp sell-off, but we may have reached a point in which they are questioning whether markets are no longer reflecting reality.

The ADP report doesn’t always attract that much attention, in fact for years it’s been borderline disregarded, but it’s impossible to ignore yesterday’s release. It smashed expectations and once again indicated we may be looking at another consensus-beating NFP number. Further signs that the labor market is red-hot and resilient.


Choppy trading in bitcoin but ultimately range-bound

Trading has remained choppy in bitcoin over the last week or so but we haven’t yet seen any significant developments, with it still largely contained to the $30,000-$31,000 range it’s traded within since bursting higher last month. There’s more cause for optimism on the back of the ETF filings but there’s no guarantee they will yield a positive outcome even if the chances are enhanced by the backing of those involved. It could also be a lengthy process which may explain the stall we’ve seen over the last couple of weeks.


ECB's Potential Hike Faces Limited Rate Upside as Macro Headwinds Persist

Craig Erlam

Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.