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Political situation in Europe takes turn for the better

The volatile retail trading phenomenon that stirred a bout of extreme volatility in the previous month appeared to have abated as we entered February 2021 on a calmer note.

The much-vaunted reflation trade did, however, hit something of an obstacle as US inflation numbers highlighted a virtual stagnation of prices for the preceding month and employment numbers remained moribund. But this wasn’t enough to curb both equity market enthusiasm and bond market pessimism as news on the pandemic turned for the better with both lock down measures and vaccine programmes apparently starting to bite. 

The political situation in Europe also took an important turn for the better with Mario Draghi taking the helm in Italy. Italian markets applauded this appointment which, for once, appeared to be a move with almost universal approval, quite a feat for a country renowned for its political discord. Entering the pandemic in a weak economic situation had made Italy a clear danger in terms of European unity as populace parties have in the past snatched such opportunities to further their anti-Europe agendas. With a reputation for sound economic management and a strongly pro-European bias Mr Draghi does appear as something of a panacea for the country’s ills. Experience tells us not to take too much for granted here though our hope is this does herald a period of stability for this large and strategically important European economy.