The Russia-Ukraine war is the main driver of financial markets’ price action this week, but investors should also be aware of what economic events might move European equities.
Since Russia invaded Ukraine, financial markets reacted sharply. In Europe, equity markets as well as the local currency, the euro, are down significantly.
Take the German Dax index, for example. It started the new trading week down -3.8% and entered bear market territory. It is down now -22.6% from the recent high, and so a bearish market began (i.e., a bearish market starts when the price declines by more than -20% from the most recent high).
Obviously, the war is the cause. However, economic data also moves the European indices, so here are three economic events to watch this week: the Revised GDP, the ECB Meeting, and the German Final CPI.
The first important piece of economic data for European equities is scheduled for Tuesday. The Revised GDP is released quarterly and shows the change in the inflation-adjusted value of all goods and services produced in the Euro area. It is forecast at 0.3%, and deviations from the forecast often lead to sharp market movements.
European Central Bank Meeting
The main event of the trading week is the European Central Bank Monetary Policy Statement. The ECB took markets by surprise six weeks ago and used a hawkish tone. It planned the normalization of its policy after the COVID-19 pandemic, and rising rates aren’t something that equity investors are fond of.
But the war and its impact on the European economies is even more harmful to the stock market. Therefore, the prospect that the ECB changes the tone at its Thursday meeting does not mean that the stocks might reverse too. What is important at this meeting is the central bank’s view about inflation and its plans to combat the rise in the prices of goods and services.
German Final CPI
The German Final CPI is scheduled for next Friday. The market expects the prices of goods and services to have risen by 0.9% in the previous month, but the risk is that we will see a higher print – after all, the WTI oil price is trading above $120 today.