European Markets Remain Resilient Amid Risk Concerns
European markets were still under some pressure on Friday, as they have been for much of the past two weeks. But stocks in the euro zone still closed in the green to end the week.
This positive close occurred even after British Prime Minister Theresa May lost yet another important Brexit vote in the UK Parliament on Friday. May’s third attempt to pass a Brexit deal in Parliament ended in another massive letdown for the embattled PM. European Union officials had earlier passed the UK withdrawal proposal before it was summarily shot down by Parliament.
European Stocks Remain Resilient Amid Worries
Despite the ongoing disappointments surrounding the Brexit process, European stocks remain entrenched in a sharp uptrend going back to the late December lows. Of course, there are even heavier pressures on euro zone stocks than Brexit. Namely, the euro economy is not in good shape.
Earlier this month, the European Central Bank (ECB) cut its 2019 economic growth forecast drastically from 1.7% back in December to a new estimate of only 1.1% GDP growth. At the time, ECB President Mario Draghi stated in the press conference that “the risks surrounding the euro area growth outlook are still tilted to the downside.”
Global Economic Growth and U.S.-China Trade Concerns Weigh
But European investors are not only focused on Europe – they’re also closely watching global economic growth and U.S.-China trade talks. Optimism that a deal may be struck between the two superpowers helped fuel surges in both U.S. and international markets on Friday. With any further positive developments in these critical negotiations, European stocks will likely be lifted along with their global counterparts.
What May Happen Next for European Stocks?
From a technical perspective, the chart above shows the iShares MSCI Eurozone ETF (EZU) in a holding pattern between two major moving averages – the 50-day and 200-day. But, as noted, the ETF is still entrenched in a sharp uptrend from December lows. As long as European stocks remain in this uptrend trajectory, a further market recovery is likely.
The market risks on the horizon, however, are significant. European economic growth is a major concern, and Brexit still remains an unknown. With any substantial breakdown below the uptrend channel, euro zone stocks could be poised to resume their longer-term bearish trend.
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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart