The stock market prepares the panic button that would cause falls of 10%

The optimism in the markets around a possible meeting between Vladimir Putin and Joe Biden to try to resolve the Ukraine crisis. Despite the fact that the European stock markets opened the week with some timid rises, this Monday’s session has turned around as the geopolitical tension monopolized the attention of investors and analysts.

The world is awaiting the response given by the White House and the European Union to Vladimir Putin’s furious speech in which he recognized the independence of the pro-Russian separatist territoriesthe most hot of the border situation, and that he was left to the limit of ordering the complete invasion of the country and threatening the former Soviet republics that are part of the EU. This decision may provoke an armed conflict if the NATO powers oppose a fragmentation of the Ukrainian territory.

Without the Wall Street reference for being a holiday in the United States, the European indices faced a day in which the EuroStoxx has lost 2.2% while the German Dax accompanied the index of the 50 most important companies of the Old Continent among the biggest falls of this start of the week, by giving up more than 2%. With these cuts, both indexes lost more than 7.2% in the year. More moderate were the falls in the Ibex 35, which closed at 8,488 points after falling 1.2%, while the London stock market is the one that most bears the cuts – and also so far this year as it is the only which remains positive, adding 1.3% in 2022–.

In fact, these generalized falls in all the markets of the Old Continent caused their respective supports to be perforated, with the exception of the parquet of Milan and Paris that remain afloat for the minimum. Thus, with the levels established by the Ecotrader adviser, Joan Cabrero, the Ftse Mib remains 1% away from its next step, while the Cac 40 must fall half a percentage point to break through its support at 6,750 points.

The endurance of Paris and Milan

That the EuroStoxx 50, the German Dax and the Ibex have lost their respective supports is a sign that “the possibility of Europe witnessing a correction similar to the one that has taken place on Wall Street is taking shape,” according to Cabrero. And this can cause fall in the markets on this side of the Atlantic around 10%, if the EuroStoxx “ends up looking for its support of 3,600 points”, according to the expert.

However, what is being witnessed in Europe must be framed in a context in which there has been no support from the bags in the United Statesaccording to the Ecotrader analyst, who highlighted the lack of support from the US stock market.

In addition, the fact that the stock markets of Paris and Milan are still afloat is “the straw that bulls can still cling to,” Cabrero said. Now, for the Ecotrader expert, today’s session will be decisive since if the EuroStoxx does not recover the 4,000 points at the close of this Tuesday and if the Cac and the Ftse Mib lose support “we would be forced to reduce the exposure to the stock market towards levels of 50% to avoid curves that could be dangerous”.

Most analysts point out that Russia, and its movements around the Ukrainian border, will mark the steps of the bags in the coming weeks (without losing sight of the monetary policies applied by central banks to contain inflation).

From Bankinter’s analysis department they suggest that Russia “will continue to tighten the rope” while every piece of news that comes from the Donbas region affects the markets. As an example, the firm highlighted last Friday’s session “more peaceful” than in the previous session with the possible meeting between Putin and Biden that would take place this week that is ongoing.

“Events in Ukraine will continue to impart great volatility to the markets in the short term,” they added from the Renta 4 firm, which does not lose hope that the planned meeting between Russia and the US can make amends with the use of diplomacy.