The fact is that investment in Europe is falling short of expectations, which is also being felt by German industry. And Italy is now back in recession, as economic output shrank in the first two quarters of this year. Analysts expect the German economy to have contracted in the second quarter as well. However, the markets are also overlooking some positive stimuli.
The ECB's measures are starting to take effect.
Loans are once again easier to obtain for companies in southern Europe. In the past two years, banks have set the hurdles for granting loans very high. The euro has depreciated significantly, which tends to make it easier for exporters to compete on international markets. Positive signals are coming from Spain and Portugal, where reforms are taking effect and economic growth is picking up. At this point, it should also be remembered that many economic research institutes and international organizations, such as the International Monetary Fund, have significantly raised their growth forecasts compared with the beginning of the year.
The news that economic activity in China is accelerating again was almost completely lost in investors' perception. And there is more positive news coming out of the USA as well. Extrapolated to the year as a whole, the economy there grew by 4% in the second quarter. However, this news was accompanied by fears of an earlier interest rate hike by the U.S. Federal Reserve. And companies are also presenting themselves in good shape in the USA. Of the 446 public companies in the S&P 500 that reported their quarterly figures up to August 7, 73% exceeded earnings expectations.
The average earnings growth was 8.4%. Analysts from https://online-exness.com/login/ were expecting a 4.9% increase in earnings. The outlook of the board members for the third quarter is also a bit more cautious than usual. However, it must be said that the quarterly reporting season, which is now almost over, was exceptionally good.
Conclusion
Looking at the facts, there is much to suggest that both Russia and Europe, along with the U.S., have a strong interest in de-escalation in Ukraine, even if it does not currently look like it.
In terms of economic data, it currently seems as if investors are ignoring the positive news. In the months before, the opposite was the case, as investors were closed to the negative news. As the fundamental outlook is positive and investor sentiment can turn quickly, we remain positive on equities. We see the current correction on the stock markets more as an entry opportunity. In this context, it is interesting to note that the stock markets of the emerging markets have held up well in recent days. These markets in particular react very sensitively to negative growth expectations.