Yesterday, Monday, was an excellent start to the new trading week in the European stock markets. The Euro Stoxx, for example, gained another 0.5 percent, further extending its rally. But how much longer can this continue? Since the beginning of the year, stock markets have known only one direction, and the longer the rally lasts, the closer a correction comes. Predicting exactly when this correction will happen is difficult, as there are currently few signs of an imminent downturn, apart from some profit-taking in Asia. And that is precisely the danger—when investors and traders become too confident in their strategy, the market often surprises them.
Stock Markets Shift to Defensive Stocks
There have been plenty of potential catalysts since Donald's inauguration that could send the stock markets downward. The ongoing talks between the U.S. and Russia, excluding the European Union, could be such an event, leaving the EU sidelined. Markets could react sensitively to unexpected outcomes, especially if tensions escalate further. British Prime Minister Keir Starmer will also participate in the European discussions in Paris.
The British stock index FTSE 100 also gained 0.4 percent yesterday, reaching new record highs. However, the rally appears to be running out of steam, making a correction increasingly likely. On Monday, defensive stocks led the gains in the index. Defense company BAE Systems saw a sharp increase of 9 percent.
Euro Fails Again at the $1.05 Mark
The euro has made a second attempt to break above the $1.05 mark. However, it has failed once again to regain some stability. Investors are now asking whether the euro can hold around the $1.05 level or whether dollar strength will return.
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