Why European Indexes Are Falling while the Pound Rises



European indexes trade lower

European markets (DBEU) were trading negatively today as the German business climate fell short of expectations. The upcoming monetary policies from the United States and Japan also contributed to investors’ caution.

The European market (HEDJ) carried over negativity from the Asian markets. The SPDR Euro Stoxx 50 ETF (FEZ) fell 0.75% as of 9:00 AM EST today. The German DAX and the French CAC 40 fell 0.79% and 0.61%, respectively.

Among other major European indexes (IEV), the crude-related Russian economy (RSX) was also trading with a negative bias. Crude futures (USO) traded near flat. The Russian MICEX fell 0.62%.

Non-Eurozone markets also suffered losses, with the United Kingdom’s (FKU) FTSE 100 falling  0.69% and Sweden’s (EWD) OMX Stockholm 30 falling 0.47%.

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Why the pound rose 0.6%?

The British pound to US dollar currency pair, which directly relates to the pound, saw an uptick today. The rise in the currency pair was primarily due to US President Barack Obama’s views on the Brexit referendum. He says that if friends of the United States are in an organization that enhances their power, influence and economy, then he would prefer them to stay in that organization. This announcement improved investor sentiment about Britain staying in the European Union. The currency pair reflected a similar sentiment, rising 0.6% to 1.45 at 9:00 AM today.

German business confidence weakens

The German Ifo business climate for April was published on a weak note today. The business climate fell to 106.6, against forecasts of 107.1. The Ifo current conditions and expectations were also below forecasts, at 113.2 and 100.4, respectively. The report attributed the fall in business climate to concerns in China, Germany’s third-largest trading partner. But the stabilizing Chinese economy in recent weeks is expected to result in a better business climate.


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