Must-know: Does the slowdown in Europe impact your investments?


Dec. 4 2020, Updated 10:51 a.m. ET

Impact of Europe’s slowdown

In the last part of the series, we discussed how global factors impact the U.S. steel industry. It’s important to analyze the slowdown in the European Union. The European Union includes 28 countries. It’s the second biggest steel consumer globally. Recently, the European Central Bank (or ECB) cut is benchmark rates.

In this part of the series, we’ll look at the factors behind the ECB’s rates cut.

Slowdown pushed ECB to cut rates

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The above chart shows the quarter-over-quarter gross domestic product (or GDP) growth in the European Union. As you can see, GDP was almost flat in the second quarter. The European Union is still dealing with the sovereign debt crisis. The GDP figures in the second quarter raised fears about the European Union’s sustainability growth. The ECB recognized the severity of the situation. It responded with a rate cut.

The slowdown in Europe was negative for the global markets. This led to a global sell-off. Steel stocks were no exception. The global markets were counting on a recovery in the European Union. The slower-than-expected GDP growth rate was negative for global sentiments.

As discussed previously, steel companies’ share prices are usually very volatile. There were concerns about growth in the European economy. This made U.S. steel companies’ share prices tank.

Steel markets hit by demand concerns

While the markets were still dealing with the European slowdown, World Steel Association presented a dull outlook for the steel market. We’ll analyze this in the next part of the series. It’s important to note that World Steel Association is the global body of major steel producers.

In this series we’re analyzing the recent downturn in steel companies like ArcelorMittal (MT), U.S. Steel Corp. (X), AK Steel (AKS), and Steel Dynamics (STLD). Some of these companies form part of the SPDR S&P Metals and Mining ETF (XME).

Click here to learn more about investing in steel.


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