The fragility of European stock exchanges today

in LeoFinance2 years ago




One of the consequences of the confrontation in Ukraine has been the flight of many investors and brokerage houses that buy and sell shares in European stock exchanges, many of them have migrated to Japan, which has low interest rates, cheap valuations, globalized companies and more cyclical index composition, as well as other Asian stock exchanges.

The European stock markets are not a good choice for analysts at present, as the uncertainty caused by inflation due to the economic measures against Russia could shake stock market indices to surprising levels in the short term.

When it was thought that the end of the pandemic would strengthen the stock market, the war exploded and volatility was present, so that large and medium-sized stock buyers have preferred to invest just enough to avoid taking risks.

Moody's Investors Service explains in its latest report that recession could become present in the old continent if the suspension of Russian energy imports to the European Union becomes total and this could lead to a global recession.

This suspension would negatively impact the entire economy and impact all asset classes, especially European utilities and non-core but energy-intensive sectors and global non-investment grade issuers with near-term refinancing needs.

S&P Global has also warned of the negative consequences for Europe of a trade rift between Russia and Germany, which would directly impact the German manufacturing sector that represents, along with China and the United States, the three global manufacturing hubs.

Paul Gruenwald, chief economist at S&P Global said, "This would translate into a decline in (German) GDP, employment and confidence, which would cause a kind of macro-financial shock. That's the kind of scenario that we are concerned about and that could move the needle."

So those who play the buy and sell game, although they remain in Europe, have started to migrate to the Asian continent and any action that impacts the European stock exchanges will make them flee, as has been happening with the shares of Russian companies in Europe that have been sold many of these at lower trading prices.

The European stock exchanges are currently the most fragile in the world and their stability will depend on the actions taken by the European Union regarding the Russian-Ukrainian confrontation and the blind support given to the requests for stricter sanctions by the United States, whose stock exchanges are favored in this situation.


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