Why indexes in Europe fell?

European shares extend losses. Optimism from the previous week disappear under pressure from the increased risks of growth and seek appropriate risk premium in the price of assets.

First risk: Once again data from China deepened worries about the constant decline in demand in the second largest economy, despite propaganda for more incentives and activity that demonstrates PBOC. The balance of exports and imports deteriorated more than expected. The picture is far below official government growth targets of 6% this year and a clear sign of ongoing weakness in consumption. Chinese data immediately hit the automotive sector and mining companies. The risk is very topical and commodity markets.

Especially for Germany, the situation is even more pessimistic after scandal software emissions at VW and the threat (of yesterday) the European Investment Bank to investigate and make early due loans to VW for 4.6 billion. Euros.

The second risk continues to be low interest rates globally have caused credit expansion and massive debt accumulation, especially visible in China.

Today's weak inflation data from the eurozone is a direct problem for the ECB and its program of "quantitative easing" existing with the primary objective to enhance economic growth and consumer prices. Addition is the new deflationary wave in the UK, which will force the BoE to maintain the current policy of record low interest rates.

Third risk: continued fear of chaos on the emerging markets. The Fed conducted indirectly movements by rumors of interest and whenever the probability of raising increase, capital rush out of emerging markets, reflecting be detrimental to local currencies and bonds.

Fourth risk: Instability in the Middle East and North Africa affects Europe directly (but also worldwide), as well as refugees and fear of terrorism. Strong growing Turkish economy is under serious political pressure, and it is a bridge to the Middle East risk to the entire euro area.

As a fifth risk can be added to the volatility in oil prices, which directly affected the entire Russian economy for example. The latest OPEC report showed that the production is on maximum levels of the past three years, which is interpreted by traders as a negative trend factor. The decline in production in the US does not have any influence in this case.

Sixth risk: Nobody knows the truth about the Russian war in Syria. The essential difference between the Russian and American approach is that there is no accurate information as to the intentions and the cost of this operation. By public officials in the RF only know that the Syrian operation does not require additional funding.

It is no accident that the index of the Institute for Zew economic sentiment across the euro area deteriorated sharply in October. The accumulated systemic risk will adjust prices until accumulate new acceptable for the market risk premium.