Europe Stock Selloff | Adam Hamilton

From Safehaven.com:

Europe has become something of a four-letter word among American investors and speculators lately. Weak European stock action has been mesmerizing stock-index-futures traders here in the States. They dump US stock-index futures in sympathy whenever Europe is selling off. This in turn spawns bearish sentiment and weak opens in the US markets. Europe is the epicenter of US stock fears these days.

Early every morning in the US, futures traders carefully digest overnight world events to help them make trading decisions. Did any market-moving news emerge? How are the Asian and European markets faring? Since the major European stock exchanges are still open during the critical couple pre-market hours in the States when that day’s sentiment is being shaped, they can have an outsized impact.

In normal times American traders don’t pay too much attention to Europe. We tend to think the massive American stock markets set the tone for the entire world’s trading, which is true most of the time. But when the US stock markets have recently suffered a selloff, the psychological gravity of overnight global action swells greatly. Stock selloffs ignite fear, and worried traders eagerly look for excuses to sell.

And boy, does Europe sure provide them! Since the world’s stock markets plunged sharply in early August, it is not uncommon to see huge down days in the major European stock indexes before the US markets open. I am talking 3%, 4%, even 5%+ daily losses! When you think of how scary down days of this magnitude are here in the States, it is easy to understand why they rile up nervous futures traders.

Continued

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One Response to “Europe Stock Selloff | Adam Hamilton”

  1. I appreciate, cause I found just what I was looking for. You’ve ended my 4 day long hunt! God Bless you man. Have a nice day. Bye

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