Stock market: Markets are plunging, the Euro is in free fall and volatility is exploding

In a climate of growing nervousness, European stock markets closed the week sharply lower, following the trend initiated by Wall Street. Markets, faced with increased uncertainties over monetary policies and diverging economic indicators, seem to be struggling to regain positive momentum. This situation, exacerbated by the declarations of several central bankers, opens questions about future economic trajectories, both in Europe and in the United States.

Markets under stress: volatility and investor caution

The week ended in the red for the main European indices. Indeed, the CAC 40 fell by 0.58%, to 7,269.63 points, while the Stoxx 600 recorded a fourth consecutive weekly decline, with a loss of 0.69%. Across the Atlantic, the trend was similar: the Dow Jones lost 0.77% and the Nasdaq fell 2.21% at mid-session on Friday. These movements reflect palpable nervousness, as indicated by the nearly 15% increase in the VIX volatility index, a barometer of stress on the financial markets.

Recent comments from Jerome Powell, Chairman of the US Federal Reserve, have contributed to fueling these uncertainties. Through his warning against slowing rate cuts too quickly, he dampened investors’ expectations, who previously estimated the probability of a further cut in December at 72%, now down to 55%. At the same time, several central bankers, including Austan Goolsbee at the Fed and Piero Cipollone at the ECB, have adopted a measured tone, which reinforces the idea that caution prevails in the face of unclear economic prospects.

Economic indicators and long-term implications

While markets digest these announcements, recent economic indicators have cast a mixed picture on the state of Western economies. Additionally, in the United States, retail sales increased 0.4% in October, but industrial production continued to decline for the second consecutive month. In Europe, the European Commission maintained its growth forecast for 2024 at 0.8%, with a downward revision for that of 2025. The United Kingdom, for its part, recorded an unexpected contraction in its GDP in September , which fuels concerns about the health of its economy.

These contradictory signals also weigh on the foreign exchange and bond markets. The euro remains near its lowest levels since October 2023, while the pound sterling hits its lowest level since January 2023. Furthermore, bond yields continue to fluctuate, reflecting uncertainty over future monetary policies. For example, the 10-year US Treasury yield rose to 4.505%, a five-and-a-half month high, before falling slightly.

These dynamics reveal a critical transition period for global economies. Monetary policy adjustments, combined with mixed economic signals, could reshape investors’ priorities in the months to come. If current volatility illustrates a need for stability, it also opens opportunities for those who know how to anticipate future movements. In Europe as in the United States, the short-term decisions of central banks will have profound repercussions on the trajectory of markets and, more broadly, on economies.