Concerns of low stock index returns due to the third wave of infections and a worrisome PMI hit the markets

The COVID-19 pandemic is once again spreading, forcing European governments to adopt new measures including restrictions on mobility which threaten economic recovery. In the United States, President Joe Bien also has also announced measures to combat the contagion, while China renews lockdown orders. In this context, European stock markets follow in the wake of Asia’s, and opened in the red this morning.

Pessimism in the markets increased after the PMI data release, which measures the activity of the service and manufacturing sectors, for the month of January which reflects a decline of 1.6 points to 47.5 points. “It seems more and more inevitable that the eurozone economy will go through a double-dip recession,” warns Chris Williamson, chief economist at IHS Markit, which publishes the PMI index. 

Yesterday, president of the European Central Bank (ECB), Christine Lagarde warned that this third wave of COVID-19 infections is affecting the economic recovery, particularly in the service sector. For this reason, she insists on the need to maintain the stimuli. 

Among the European indices, the one with the greatest losses in the middle of the session was the Italian FTSE MIB, with a decline of more than 2%. It was followed by the Spanish IBEX 35 (-1.8%), the French CAC 40 (- 1.36%), the German DAX (1.06%) and the FTSE 100 (-0.90%).

The futures of Wall Street also announce falls, although not as pronounced as in Europe. The US indices put an end to the all-time highs of these days for the moment.

Source: Admiral Markets MetaTrader 5. S&P500 daily chart. Data range: from December 20, 2019 to January 22, 2021. Prepared on January 22, 2021 at 12:30 CET. Keep in mind that past returns do not guarantee future returns.

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