European Markets Came Under Pressure on January 2, 2018: What’s the Reason?

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As expected by the market players, the European markets have been witnessing the impacts of the tensions related to the global economic downturn which could impact the investors’ sentiments and they might decide to deploy their investable capital towards the risk-free avenues. It can be assumed that the worries about the slowdown in the Chinese economy have been impacting the global markets. The hints of the weaker Chinese economy are indeed the bad news for the global investors as it signifies that the trade war between the US and China has been impacting the economy of China. It could be of big concern when seen from the global economic growth perspective.

Needless to say, if the fears of a slowdown of the global economy rise, these could negatively impact the oil prices also mainly because the tensions related to the oil demand would rise. The investors also need to know that, on January 2, 2018, the Australian markets have ended the session on the negative note. S&P/ASX200 ended at 5557.8 which implies an intra-day fall of 88.6 points or 1.6%. However, it can be considered that the efforts are being made with respect to the settlement of the trade worries. The global markets have been witnessing the impacts of other factors as well. The investors in the US markets are fearing that the rate hike pace of the Federal Reserve might negatively impact the broader US markets which could further impact the economic growth. Therefore, considering the present scenario, the global markets are being weighed by several macroeconomic variables. If the trade war between the US and China settles, that could support the global equity markets.

However, the investors cannot ignore that FTSE 100 Index managed to witness a rebound during the trading session and finally ended the session in green. Earlier, the index was trading in red. FTSE 100 Index ended at 6,734.23 which implies the rise of 6.10 points or 0.091% on the intraday basis. These types of volatility further increase the worries of the global market participants, and they try to make deployments in the equity markets. The political risks with respect to the markets in Europe have also been weighing over the minds of the market players.

If the markets remain volatile moving forward, it might impact the investing behavior of the market participants and these players might decide to stay away from the risky assets like equities. The fears of the global economic slowdown are also impacting the investors’ behavior. Moreover, the oil prices were also witnessing the impacts of the global macroeconomic factors and there are also worries related to the oil demand. The weakening of the financial markets increases the risks of the global downturn which might impact the oil demand and hence, oil prices. The slowdown of the Chinese economy also adds up to the tensions of the market players. It can be assumed that the investors, moving forward, might focus towards the earnings season of the US companies.

Also, Next PLC (FTSE: NXT) ended yesterday’s session by witnessing the rise of 4.66%. Other stocks like Fresnillo PLC (FTSE: FRES) and Paddy Power Betfair PLC (FTSE: PPB) ended the session by rising 3.26% and 2.81%, respectively.