European stocks are in pure risk-on mode, uninhibited by a strengthening euro. In fact, the positive correlation between the two could give the region's equities more room to run if they can overcome trade-war tensions and definitively move past political jitters. With Italy and Spain leading today's advance, markets already seem to be looking past headwinds from the latter.
The 30-day positive correlation has been gaining strength recently amid rebounds in both the trade-weighted euro and the Euro Stoxx 50 and is even going in the same direction on the DAX.
That bodes well for markets ahead of next week's ECB meeting, especially if the outcome is a more hawkish tilt as my colleague Richard Jones points out. But that outlook could be held hostage to event risk especially, the G-7 meeting and developments in Italy.
Source: Bloomberg Pro Terminal
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