Frankfurt, Germany. European Central Bank (ECB). Image source: iloveotto © 123RF.com
Earlier today, the ECB published its monetary policy minutes from its last meeting, which took place from the 15th to the 16th of July. The comprehensive document began with a review of the latest financial, economic, and monetary developments and policy options for the Governing Council of the Bank.
Since the Council's previous meeting in early-July, it has been evaluated that:
"In both advanced and emerging market economies, financial conditions were approaching pre-pandemic levels at a slowing but steady pace, as also reflected in the strong recovery in global stock markets."
Unsurprisingly, the Governing Council continues to observe a direct correlation between the number of COVID-19 cases in Europe and the momentary condition of investors' sentiment in the Eurozone, which is completely inlined with our own estimations from earlier today.
Positive signs of global economic recovery were also reviewed and were attributed to the gradual easing of containment restrictions. Moreover, the Council acknowledged the role that the rising oil prices are having in fostering better price stability worldwide.
" Since the Governing Council’s June monetary policy meeting, oil prices had increased by around 11%, to just over USD 42 per barrel, supported by a stronger than expected pick-up in demand for oil on the back of the easing of lockdown measures."
Overall, the Minutes report did not deliver any major surprises as the European Central Bank maintains its overarching course. The report highlighted a pick-up in Eurozone's economic activity in Q2.
" […] after a steep fall in the first weeks of the second quarter, the incoming data signalled an increase in the level of euro area economic activity, which was broadly in line with the baseline scenario of the June Eurosystem staff projections. However, the breadth and scale of the recovery remained uneven and partial."
Due to this 'uneven' and 'partial' recovery, most European indices continue to struggle.
As can be seen on the 4H comparison chart below, the German DAX 30 remains the best-performing stock index in the Eurozone, while the French CAC 40 falls behind the composite Euronext 100.
The latest retracements of the three indices have failed to rise above their previous peaks from the 21st of July. This behaviour is demonstrative of waning bullish sentiment and could signal the development of an even bigger bearish correction in the near term.
EU Indices 4H Comparison Chart. Image source: Trendsharks ©, created with TradingView.com
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