Iran Heats Up, Fed Shocked—European Stocks Drop
European stocks started the week lower after investors were again haunted by two major sources of risk: geopolitical escalation in Iran and renewed pressure on Federal Reserve Chairman Jerome Powell.
The pan-European Stoxx 600 index fell around 0.2% shortly after the open on Monday, with most bourses and major sectors trading in the red. Market sentiment appeared cautious as market participants preferred to wait for clarity on the direction of risk before taking large positions.
At the country level, the UK's FTSE 100 opened down 0.26%, Germany's DAX fell almost 0.1%, while France's CAC 40 fell 0.25% and Italy's FTSE MIB fell 0.38%. Pressure was fairly even, indicating the market has yet to find a strong positive catalyst to start the week.
Investors' primary focus is on Iran, as widespread protests have reportedly been met with a harsh crackdown by local authorities. The market is also monitoring reports that US President Donald Trump is considering options for action against Iran, ranging from military to non-military measures.
Several reports indicate that Trump has been presented with several plans, and his aides are scheduled to provide further briefings on Tuesday, including military, cyber, and economic options. This uncertainty about US action has kept global markets on the defensive, especially in riskier assets.
On the other hand, the market was also shaken by issues from the US: Wall Street futures weakened after news emerged of an investigation targeting Powell. Sentiment is sensitive because this issue touches on a crucial aspect for the market: central bank independence.
Powell confirmed that federal prosecutors have opened an investigation into his Senate testimony regarding the renovation of the Fed's office building. However, he emphasized that the move is seen as part of an effort to exert political pressure on monetary policy, and he stated that he will not bow to such pressure. Powell's term as chairman is scheduled to end in May.
With a lack of major data releases or major earnings reports in Europe today, market direction will likely remain determined by geopolitical headlines regarding Iran and developments on the Fed, which have the potential to maintain high volatility throughout the week.
Source: Newsmaker.id
