The selling is continuing in equities today, as it has been all through this week. Here’s a look at how European indices are performing on the week, taking into account the losses at the moment:
- Eurostoxx -2.8%
- Germany DAX -2.5%
- France CAC 40 -3.1%
- UK FTSE -2.3%
This isn’t only isolated to Europe, with Wall Street also seeing a streak of losses stretching to last Friday.
There are a couple of stories at play this week that perhaps is impacting sentiment. For one, China’s stimulus has been greeted with disappointment as markets are hoping for more from Beijing. Adding to that was the hotter than expected UK inflation data yesterday, prompting worries about more persistent price pressures in Europe.
Then, there’s also just the general hangover of higher interest rates taking its toll on credit conditions and weighing on the economic outlook for the year. With global growth not able to rely on China, perhaps things aren’t that optimistic looking out to the rest of the year.
Or perhaps the selling just has a much simpler explanation. That being we are seeing a risk rotation from stocks to bonds as flows ramp up ahead of quarter-end. Equities have enjoyed a stellar run in Q2 and perhaps we are seeing that rebalance towards the ending stages of the month/quarter in June.
It’s certainly plausible to argue both sides of the equation and maybe the selling has a bit to do with both factors as well. That is certainly making things fairly tricky towards the end of this week, with more focus on month-end and quarter-end set to continue next week.
What are your thoughts on the matter?