Shares are falling for the third day in a row
The stock markets have been under selling pressure since the beginning of the week, helped by high valuations as well as inconspicuously rising yields on US government bonds. Under pressure are mainly risky assets in Europe, where investors are watching a very fragile economic recovery. A possible decline in bank loans also plays a significant role in this scenario.
Obavy z ekonomického oživení
The economic recovery in Europe may not be nearly as brisk as in the United States, which is something investors are already aware of due to lower fiscal and monetary stimulus. Moreover, the latest information may further open up the imaginary scissors between Europe and the US. European banks could restrict access to credit in the second quarter, according to an ECB survey. This reflects banks' uncertainty about the economic impact of the third wave of the pandemic. Many economists have criticized the ECB in recent months for not doing enough to fight a possible recession. Although the bank increased the volume of QE, a separate pandemic fund was stopped by German Eurosceptics.
These events seem to be gradually affecting the mood among investors with allocated capital in European shares. They are beginning to fear that politicians will not be able to fully disclose how they are going to mitigate the impact of the pandemic. Once again, the ECB has failed to provide sufficient security for the market, which may now open up room for further nervousness by the June meeting. The German stock index DAX fell from its record highs and this negative mood soon was followed by other European indices. The decline was also due to the fact that the indices were in most cases at record highs and the growth over the last 2 months was not supported by economic or vaccination data that would promise the approaching end of large-scale lockdowns.
Chart: DAX Daily Chart (source: cTrader PurpleTrading)
Revenues on the brief rise yet again
Rising US government bond yields may be a potential old-new problem. At the end of last week, yields on ten-year maturities fell below 1.53%. This reflected both a better mood on risky assets and higher demand for government bonds, which offer a more interesting yield. Yesterday, yields got back above 1.6% and can only go up in the medium term. This can potentially recreate a problem for technology and other growth stocks that benefit from lower rates. Today, the Nasdaq technology index is falling for the second day in a row, pulling other sectors with it.