Optimism is returning to the European Union a year on from the initial hit from Covid-19 which impacted the global, and European markets. Policies are in motion to see European Equities post significant gains following positives moves in the US.
PrimeXBT analyst Kim Chua has predicted that European Equities could be the next to take off following the good news on the Covid-19 front and after looking at how the US Equities market has performed.
Post the ECM meeting last week, European Equities roared to life and is trading where it was before the pandemic led selloff started. This is after ECB chief Christine Lagarde mentioned that they are going to speed up asset purchases to curb the rise in yields, which is a very favourable environment for risk assets like equities.
Concerned that a rise in bond yields could derail a recovery across the 19 countries that share the Euro, the ECB said it would use its 1.85 trillion Pandemic Emergency Purchase Programme (PEPP) more generously over the coming months to stop any unwarranted rise in debt financing costs.
With news of vaccines successfully able to curtail the spread of Covid19 virus, optimism is high as economies in Europe reopen. This will see pent-up consumer spending increase by a great deal, thereby boosting economic figures.
“I expect European Equities to outperform the US Equities for the rest of the year now that the ECB appears to be more aggressive than the US Fed in trying to stop yields from rising,” Chua explained.
A lot of these monetary policies are aimed at stimulating the economy in the wake of the COvid-19 pandemic impact. For the ECB to be going after yields and keeping them down there is a good chance for the EU Equities market to skyrocket and really take aim at the US ones which have already performed quite well.