Market: risk aversion is growing in the face of the virus


(CercleFinance.com) – The Paris Bourse is expected to drop sharply on Monday at the opening, the containment measures taken in several European countries plunging the markets back into a climate of risk aversion.

Around 8:15 am, the ‘future’ contract on the CAC 40 index – now on the January expiry – drops 165 points to 6,749.5 points, announcing a heavy correction at the opening.

The deterioration of the health situation in the Netherlands, Austria and Germany – which is accompanied by the implementation of traffic restriction measures – raises fears that the European economy will be slowing down again.

The governments of the United Kingdom, Spain and Ireland are also considering possible lockdowns, which again limits investor appetite for risky assets.

“The service sector, and especially the tourism sector, are the most vulnerable to the implementation of these restrictions on social interactions,” Goldman Sachs teams recalled last week.

The American investment bank believes that the situation is all the more damaging given that the end-of-year holiday season represents an important period for the travel and leisure businesses.

Approaching the end of the year usually favors a bullish move in stock markets, but caution should be called for this year given the rapid spread of the Omicron variant.

The session of the ‘four witches’ on Friday had already given rise to a wave of releases instead of the traditional purchases of the ‘stars of the year’ as part of the dressing of balance sheets.

In Asia, the Tokyo Stock Exchange ended with a decline of 2.1% on Monday, while in Hong Kong, the Hang Seng index was also preparing to end the day with losses of more than 2%.

Although the Federal Reserve has confirmed the tightening of its monetary policy, thus removing heavy uncertainty in the markets, it is no longer at all certain that the stock markets will experience a positive end to the year.

Prices have progressed well this year (+ 25% for the CAC 40 since January 1) and investors could be tempted to sell the winning stocks of their portfolios before starting to establish a new strategy for the 2022 financial year.

The absence of many parties for the holidays which results in a lack of liquidity may well amplify the phenomenon.

Volumes are shaping up to be low during this week, which will be partially shortened due to Christmas, since the Parisian market will close at 1:00 p.m. Friday before the Christmas weekend.

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