Stock markets up until February, end of ECB cuts for this year

(Il Sole 24 Ore Radiocor) - Expectations for financial market growth over the next six months remain broadly stable. According to the August survey conducted by Assiom Forex among its associates in collaboration with Il Sole 24 Ore Radiocor, for 79% of traders the stock exchanges will not fall from current levels in the next six months (it was 82% in the previous survey in July). More specifically, 39% of respondents expect indices to rise (ranging from +3% to over +10%), down slightly from 40% the previous month but still up sharply from 27% in June. 40% point to unchanged indices, in line with 41% in July. The proportion of those expecting a fall in equity markets (ranging between -3% and -10%) rose slightly, from 18% to 21%, while no one fears a sharp drop, over ten percentage points. "The Assiom Forex survey for August shows that the percentage of those expecting a rising stock market has remained substantially unchanged, although dropping slightly compared to July, as has the percentage expecting a stable market," commented Massimo Mocio, president of Assiom Forex.

The prospect of an easing of the cost of money by the Fed will keep the dollar under pressure in the coming months. For 86% of Assiom Forex traders, the euro will remain at least at current levels against the greenback until February. This percentage is up more than ten points from 74% in July. More specifically, 44% of respondents (up from 36% in July) indicated that the current strength between the two currencies will be maintained, while for 42% (up from 38%) the euro will strengthen further against the greenback. Decreasing sharply (from 26% to 14%) is the percentage of those who see a falling euro/dollar exchange rate. "Against a backdrop of stabilisation of the euro against the dollar - with the exchange rate remaining virtually unchanged in August (1.16-1.17) - the majority of respondents expect a further period of stability for the single currency, while the percentage of those expecting a further depreciation declines significantly," says Mocio.

Financial market participants are becoming increasingly confident about Italy's financial strength. According to the survey, in August, the proportion of respondents expecting a spread between Btp and Bund below 100 basis points increased further (to 73% from 69% in July). At the same time, expectations of an increase in the spread between Italian and German bonds fell: 21% indicated a range between 100 and 150 points, compared with 28% in July. However, the percentage of those expecting a spread between 150 and 200 basis points rises slightly to 6% (from 3%). No increase above 200 points is indicated (as in the previous survey) . "After touching lows again since 2021, the Btp-Bund spread widened slightly, approaching 90 basis points, due to political tensions in France and the sharp increase in government issues after the summer break. Volumes equalled the record of 18 billion placed in a single day," commented Massimo Mocio, president of Assiom Forex.

The ECB's path of easing the cost of money may have come to an end for this year. This is the view of the majority of Assiom Forex traders surveyed in August. 53% of the respondents believe that the European Central Bank will keep rates firm at 2% until the end of 2025. However, 47% expect a further cut between October and December. "Investor sentiment has been supported by the Federal Reserve's openness to a possible cut in official rates," says Mocio. "In Europe, the majority of the sample expects rates to remain stable until the end of the year." In one year (June 2024-June 2025), the ECB made eight rate cuts before stopping at last July's meeting.