Posted Jan 25, 2022, 9:25 AMUpdated Jan 25, 2022, 12:56 PM
The main European stock markets are up on Tuesday after a historic turnaround on Wall Street on Monday. But investors remain nervous. Uncertainty remains on the evolution of the situation in Ukraine and the strategy of the Federal Reserve in the United States.
The CAC 40 was up 1.38% to 6,881.14 points at the end of the morning after falling nearly 4% on Monday. For its part, the Dax in Frankfurt was up 1.07%, while the FTSE 100 in London rose by 1.03% and the EuroStoxx 50 by 1.22%. The good results of the telecoms equipment manufacturer Ericsson and the Swiss watchmaker Swatch are driving the European market in particular.
This rebound comes the day after an extremely volatile session. European Markets cracked on Monday. The Paris market posted its worst performance since November and the broad European Stoxx 600 index ended the day down 3.81%, unheard of since June 2020.
The markets were brutally overtaken by geopolitical tensions with NATO’s announcement of the dispatch of reinforcements to Eastern Europe. The United States has placed 8,500 soldiers on alert, while Moscow accuses the West of stoking tensions.
The Federal Reserve’s first monetary policy committee meeting of the year, which begins on Tuesday, is also fueling investor concerns. Goldman Sachs expects the first rate hike in March and a total of four rate hikes this year.
“Volatility is clearly back and nervousness is extreme before the Fed meeting which starts today before delivering its conclusions tomorrow”, comments Tangi Le Liboux at Aurel BGC. “The message from the White House is clear: inflation is too high,” continues the analyst. According to him, investors should not “hope for sweet words” from Jerome Powell, the chairman of the US Federal Reserve.
Turnaround on Wall Street
Monday evening, however, Wall Street experienced a spectacular reversal. Investors took advantage of the fall at the start of the session – it reached 4% at the end of the European session – to hunt for bargains.
Finally, the Dow Jones ended up 0.29%, the S&P 500 0.28% and the Nasdaq 0.63%. These reversals have not happened very often in history. Prior to yesterday’s session, the S&P 500 had rallied from a 3.98% intraday drop only twice since 1977, on October 16 and October 23, 2008.
S&P 500 high-low-close data began in 1977.
At today’s low, the S&P was down 3.99%
Recovery from an intraday loss of more than 3.98% three times,
Jan 24, 2024 (today)
Oct 16, 2008 = down -4.63% and closed up 4.25%
Oct 23, 2008 = down -4.28% and closed up 1.26%
—Jim Bianco biancoresearch.eth (@biancoresearch) January 24, 2022
Far from being reassured by the rebound on Wall Street on Monday, Asian stock markets have also suffered. The Nikkei in Tokyo lost 1.66% on Tuesday, the lowest since December 2020, while the Shanghai Composite fell 2.58% and the CSI 300 2.26%.
However, the rebound in American and European markets could prove to be short-lived. Wall Street is again expected to fall on Tuesday.