December 2, 2020 10:23 PM

EU markets at 5-month low on fresh lockdown fears

The ever-growing threat from the second wave of COVID-19 cases is fueling fresh lockdown fears in Europe, causing markets to open 2-3% down on yesterday in this morning’s trade—the lowest levels in over 5 months. With EU sentiment heavily impacting many Canadian industries directly, the effects of this morning’s events should be expected to be felt on our side of the pond this morning.

/ Published 1 month ago

Fresh lockdown fears are pushing EU markets to their lowest point in 5 months
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In a move that should be expected to ripple across the pond and impact this morning’s opening, some investors have been clamoring to pull their money out of the markets, pushing European markets 2-3% lower in the morning’s trade.

This morning’s drops have pushed EU markets to their lowest point in 5 months and, so far, they are showing little signs of recovering the losses in tody’s trading. And with the French president, Emanuel Macron, set to deliver the country’s next steps in the fight against COVID in a presidential address this evening, there may only be continued downward pressure throughout the day.

Prominent politicians and representative bodies are fuelling lockdown fears in Europe

Fueling the fears, German chancellor Angella Merkel is pressing for a widespread shutdown of all restaurants and bars beginning early to mid next week. Similar fears are also mounting in France, with prominent public bodies urging Emanuel Macron to reinstate lockdowns.

Particularly vocal in its opinion, the Fédération hospitalière de France (FHF) has released a statement: “Faced with the accelerating spread of COVID-19 in France and in Europe, we are calling for the broadest possible re-confinement. This choice appears to be the only solution to succeed in treating all French people, whether they be suffering from COVID-19, any other serious illnesses, or involved in life-threatening accidents.”

If tougher measures are introduced in Europe, the effects will be far-reaching, only fanning the flames of already negative investor sentiment currently feeding off second wave fears.

The week on the TSX so far

Already almost 280 pts down on last week’s closing, the S&P/TSX Composite Index’s trajectory so far this week is representative of the widespread negative sentiment holding markets down at the moment. With the index spending most of the previous day trading near weekly lows, there seems to be very little will for new liquidity to enter the markets.

Of course, the damage thus far has been mostly confined to particular stocks and sectors, with energy being a particularly heavy loser, dropping 3.3% on falling U.S. crude prices. Notable amongst the losers in the energy sector, Cenovus Energy Inc fell 12.8% on news that the company was buying Husky Energy Inc.

What to expect in Canadian markets this morning

Positive sentiment in Canada is already at incredibly low levels, and there have been reports circulating that propagate the belief that additional lockdowns are yet to come. And while Prime Minister, Justin Tredeau asserts that we now have “more tools” to fight the virus than we did during the first round, this does little to ease the pressures being put on some of the largest industries on the Canadian market.

With everything from financials, aviation, and energy already struggling in the enduring pandemic, any sign of worsening—even if the threat of widescale lockdowns is removed—will only put additional downwards pressure on markets, even if the threat comes from outside of the country.

Unfortunately for these industries, they are all so heavily dependent on international events and trade—e.g. passengers, energy prices, etc.—and, as these industries also happen to be some of the largest by market capitalization, their losses will be the story of the markets as the day unfolds.

(Featured Image by Pixabay via Pexels)

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