Spreadex Market Update

European Commission forecasts pour more cold water on market rally



Already fearful of the covid-19 situation in the US and Australia – Melbourne has just been put in a 6-week lockdown – the European Commission’s latest forecasts merely compounded the market’s concerns on Tuesday.

The broad direction of the bloc’s GDP revisions was sharply downwards. As a whole the European Union is now facing am 8.3% contraction in 2020, compared to the 7.4% estimate announced in May. France saw one of the more significant changes, the country looking at a 10.6% drop, far higher than the 8.2% decline initial forecast.

Spain and Italy were both dealt their own ugly numbers, heading for -11.2% and -10.9% respectively. Germany, on the other hand, saw a minor improvement, their typical Teutonic efficiency resulting in a move from -6.5% to -6.3%.

Despite January’s Brexit the EC still has done the kindness of providing the UK with a revised GDP forecast – though it’s a rather unpleasant present, with the United Kingdom now on track for a 9.7% contraction, against May’s -8.3% estimate.

Avoiding a freak out, the European indices nevertheless dropped a bit deeper in the red following the EC’s statement. The FTSE found itself nudging ever closer to 6200 as it fell 1.3%, with the DAX matching that pace. The CAC performed a smidge better despite France’ dire outlook, slipping 1.1%.

Without its own fresh forecasts, but still chewing over a nightmarish weekend for covid-19 cases domestically, the Dow Jones is eyeing a 250 point decline after the bell, one that would force it back below 26050.

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