Rising European Stocks and Currency Show Investor Interest
By Daisy Joseph
The European stock market turns bullish aided by the increasing value of euro in the forex market. For the first time in a year, the stocks and currency are moving forward in the same direction. The Euro Stoxx 50 index, along with the single currency gained 1%. The 20-day correlation data of both has reached the highest value, since October 2016. The stock market and euro currency have been moving in the opposite direction, since 2014. Weaker currency helped the overseas earnings. The equity markets were reliant on the currency value, a few months ago.
The positive correlation signals that investors are gaining confidence in the European stocks. The stronger euro is largely ignored as the stocks have started benefiting the investors. The improvements in economic data have helped the European equities. The political threat associated with the election of anti-EU leaders has diminished as the polls don’t favor the election of French Presidential candidate Marine Le Pen. The economy of the European Union continues to strengthen, despite worries about Britain’s move out of the EU.
Equity experts are happy that the equity markets rally, along with the currency in the market, as it is an indication of strengthening of market fundamentals. Stronger growth implies that the equity markets don’t rely on the stronger currency anymore. Foreign investors have started investing heavily in European stocks and this is evident from the largest inflow to the European stock market, since the Brexit vote in 2016.
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