The divergence between European and US stock markets remains evident. While European markets, such as the DAX, hit a new all-time high, US markets closed entirely in the red on Monday, continuing their correction.
Which direction this divergence will ultimately resolve in remains to be seen. After reaching its all-time high, the DAX experienced some selling pressure but without facing significant distress. Are investors celebrating the emancipation of the European Union? Possibly, alongside the undervaluation of European stocks, another factor is that Europe is already in the middle of a recession and looking ahead, whereas the US may still have a recession looming—potentially self-inflicted by the US government’s aggressive approach to tariffs on trade partners. A possible indicator of this is the ISM Manufacturing Index, which declined in the US, meaning that purchasing managers are more pessimistic about the future than the market had anticipated.
All-Time High in FTSE 100 and 6-Week High in the British Pound
A similar picture is emerging in the UK market. Looking at Britain, the British pound has reached a 6-week high. Investors are regaining confidence in the currency, and the stock market is also attracting interest. The British pound is trading at $1.27, right at a resistance level. If it manages to break through, the pound could rise to $1.28. This development is currently going hand in hand with the stock market. On Monday, the FTSE 100 surged once again to a new all-time high. However, after a strong upward move, profit-taking quickly set in, meaning investors now need to be cautious about whether the market can maintain its stability.
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