The European economy is showing resilience in the fourth quarter of 2020

The release of GDP data of two out of the four largest economies of the Eurozone - France and Spain - didn’t add optimism in the market. These countries finished 2020 better than expected, suggesting that the region is likely to pull out of a deep recession.

Spain's gross domestic product unexpectedly rose to 0.4%, despite expectations for a 1.4% fall. France's GDP decreased by 1.3% against the expected -4.0%. The higher figures are generated by the acceleration in consumer spending. In France, there was a sharp rebound in the retail sector to 23% in December after falling in November by 18%. Spanish consumer prices showed positive dynamics instead of the expected deflation.

However, the outlook in both countries remains bleak just like in the bigger part of the region. The risk of longer constraints and greater need for incentives is on the horizon. European Central Bank President Christine Lagarde has already pledged to strengthen stimulus measures if necessary.

The stock market remains pressured. S&P 500 futures contracts continue to decline as traders move into defensive assets. The dollar showed the biggest weekly gain since October. South Korea has the largest losses in the entire Asian region. European stocks lost about 1% at the opening of trading. US Treasuries yield rose to 1.055%.

It seems that the week ends with the strongest decrease in three months. Some Wall Street strategists are confident that investors should buy the decline due to the expected economic recovery from the pandemic. Others fear that delays in vaccine supplies signal overestimated recovery estimates.

Main market quotes:

S&P 500 (F) 3,743.88 -35.37 (-0.94%)

Dow Jones 30,603.36 +300.19 (+0.99%)

DAX 13,534.05 -131.88 (-0.97%)

FTSE 100 6,468.75 -57.40 (-0.88%)

USD Index 90.657 +0.230 (+0.25%)

• – German GDP (q/q) (4 qtr.) at 11:00 (GMT+2);
• – German Unemployment Change (Jan) at 11:00 (GMT+2);
• – Canadian GDP (MoM) (Nov) at 15:30 (GMT+2).

by JustMarkets, 2021.01.29

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.