Markets in Asia and Europe have been in positive territory today, after closing last week in the red. The FTSE 100 is up by 0.73%. The DAX and CAC also performing well at 1.28% and 0.78% respectively. It’s a similar story in Asia where the Nikkei is up by 0.76%. In the U.S, the markets have opened in positive territory, with companies like Amazon (AMZN) driving momentum. The improved sentiment in the markets is driven by an expectation of improvement in the macro-environment.
One of them is the increased political certainty in Europe. After a long period of negotiations, the EU and the U.K have come to an agreement with regards to Brexit. This takes away lots of uncertainties for businesses operating in Europe. Considering that the EU and the U.K are some of the biggest markets for American companies, it is expected that a more certain business environment will help drive growth in coming quarters. Still in Europe, the Italian government is showing willingness to cut its budget, to align with the rules and regulations of the EU. This could avert a crisis that would be worse than Brexit in Europe, further helping stabilize the macro-economic business climate in the EU region. That’s a positive for markets all across the world including in the U.S.
The other key factor playing a role in the positive sentiment in the market today is the possibility of an easing of tensions between the U.S and China. The trade war between the U.S and China has been hanging as a dark cloud over the markets for some time now. That’s because the two economies are heavily intertwined and tariffs are hurting the growth prospects of businesses on both sides of the Pacific. The markets expect things to ease up following the upcoming G20 meeting. During this meeting, Donald Trump is expected to meet with his Chinese counterpart and part of the agenda will be trade issues between the two countries. In case their meeting brings out a positive outcome, such as putting an end to the trade war, it could play a role in driving growth, and by extension positively impact on corporate earnings in the stock markets.
Positive sentiment is also driven by signs that consumers are spending more in this festive season. Online sales have peaked all across the world, and especially in the U.S. This is an indicator that people have money to spend, a sign that the U.S economy is still strong in spite of the recent challenges such as the increased tariffs on Chinese goods, and rising interest rates. Investors expect this to help drive the market, at least in the short-term.
It is going to be an interesting week for U.S markets, especially for the NASDAQ now that tech companies like Amazon (AMZN) are showing signs of a rebound. Markets in all major economies could experience a major rebound this week, and further drive up investor sentiment.