London View

European stock markets paused for breath after climbing to a six-year high

European stock markets paused for breath Tuesday after climbing to a six-year high in the previous session – UK markets are playing catch-up with European and Asian peers, following the bank holiday weekend.

 

US markets too were closed Monday for the long weekend – stock futures in the states are currently indicating a slightly higher open ahead of data on US consumer confidence and durable-goods orders due later in the session.

 

There’s little out on the euro zone economic calendar Tuesday with traders eyeing the US data for fresh direction following a lack of macro indicators since Friday last week in global markets. In Europe, we’ve had an important weekend with European elections, which saw eurosceptic parties in France and the UK making significant gains.

 

Traders are still absorbing the political news coming out of the euro zone –financial stocks have been supported by Italian Prime Minister Matteo Renzi’s party beating a populist challenger in the European elections. Policymakers from the EU are set to meet today for policy discussions in the wake of gains by protest parties  across the Euro-zone.

 

Attention is also on the European Central Bank, with rising hopes that the central bank is preparing a stimulus package next month. That follows comments by ECB President Mario Draghi on Monday in which he said he sees risk that expectations for ultralow inflation will gain a grip in the euro zone and spur consumers and businesses to delay purchases, which in turn raise the deflationary threat.

 

His comments were taken as a sign that the ECB is considering a wide variety of options, from interest-rate cuts to new bank loans or broad-based asset purchases. In the meantime, the euro currency is likely to remain under pressure in the run up to the ECB policy meeting early next month.

 

Geopolitical tensions remain, but are easing somewhat following the elections in Ukraine, which saw victory for Petro Poroshenko. Moscow said it was willing to hold talks with Kiev’s newly elected president, causing hope of progress between both countries which could see a war being avoided.