European Shares Strengthen, Thanks to Political Developments

Published on: 16 Oct, 2017

Markets in Europe have opened to a positive news with the investors 'seemingly' more confident about the future. The reason behind the shares strengthening early in the week is that some favorable developments have been happening in the UK, Spain, and also in Austria where elections have just concluded.

The improvement in the market has spanned nearly all the segments. The Stoxx 600, which is pan-European, has registered a 0.17% increase. Banking is the only area where the going has not been as good. According to European Central bank Vice President, Victor Constancio, there is a reason to expect that inflation will increase in the Eurozone if the European economic recovery stays on track. However, he also pointed out that this will hinge significantly on how much monetary accommodation is allowed.

Crude has also started out the week on a good footing and prices are mainly higher because of fears that the U.S. may spark off more sanctions against Iran. Added to this worry, there is also concern about the ongoing political uncertainty in Iraq that has also shored up crude prices.

In Spain, the uncertainty about the political situation in Catalonia is the main factor that can have an economic impact on the Eurozone and its markets. It is as yet unclear whether President Puigdemont will call for independence here and this will become clear today. Spain's indices are likely to move dramatically once more is known about this situation.

In Britain, the markets are awaiting more news about the Theresa May- Jean- Claude Juncker meeting. This meeting between the British leader and the European Commission President and also the chief negotiator for the European Union, Michel Barnier, is expected to throw light on the Brexit agreements, mainly the trade deals. This has been a big bone of contention for the British and the Eurozone members.

In Austria, the victory of Foreign Minister Sebastian Kurz has also set the stage for some political changes, especially since some challenging negotiations for a coalition government are coming up now. Irrespective of this, investors are going to be influenced by the fact that a young leader, the youngest in Europe, actually, will be at the helm here now. The coming days will show how much confidence the market seems to have in Kurz's capabilities and leadership skills.


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Danny Abramov



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