European Stocks Drop on Policy Risk
European stocks dropped for the first time in three days on Monday, as investors weighed the risk of further policy tightening in the region. The Stoxx Europe 600 Index fell 0.3%, with banks and energy companies leading the decline.
Risk of Further Policy Tightening
The European Central Bank (ECB) is expected to announce further policy tightening measures at its meeting later this week. The bank is expected to raise interest rates and reduce its bond-buying program. This could lead to higher borrowing costs for businesses and households, which could weigh on economic growth.
The ECB is also expected to announce new measures to address the region’s high levels of public debt. This could include higher taxes or spending cuts, which could further dampen economic growth.
Banks and Energy Companies Lead Decline
Banks and energy companies were among the worst performers on Monday, as investors weighed the risk of further policy tightening. Banks were hit by the prospect of higher borrowing costs, while energy companies were hit by the prospect of lower demand for their products.
The banking sector was the biggest loser, with shares of Deutsche Bank AG, UBS Group AG, and Credit Suisse Group AG all falling more than 1%. Shares of oil and gas companies such as Royal Dutch Shell Plc and Total SA also fell more than 1%.
European Markets Mixed
European markets were mixed on Monday, with some markets rising and others falling. The German DAX Index rose 0.2%, while the French CAC 40 Index fell 0.4%. The UK’s FTSE 100 Index was flat.
U.S. Markets Rise
U.S. markets rose on Monday, with the Dow Jones Industrial Average and the S&P 500 both rising more than 1%. The Nasdaq Composite Index rose 0.7%.
Asian Markets Mixed
Asian markets were mixed on Monday, with some markets rising and others falling. The Shanghai Composite Index rose 0.3%, while the Nikkei 225 Index fell 0.2%. The Hang Seng Index was flat.
Outlook
Investors will be watching the ECB’s meeting later this week for further clues on the region’s economic outlook. If the bank announces further policy tightening measures, it could weigh on European stocks in the near term. However, if the bank takes a more dovish stance, it could provide a boost to the markets.
In the U.S., investors will be watching for further clues on the economic recovery. The U.S. economy has been showing signs of improvement, but the pace of the recovery remains uncertain.
In Asia, investors will be watching for further developments in the ongoing trade dispute between the U.S. and China. The two countries have been locked in a trade war for more than two years, and a resolution could provide a boost to the region’s markets.