European stocks are trying to recover after a rebound on Wall Street, with different indices showing varied results. The Eurostoxx has increased by 1.0%, Germany’s DAX is up by 0.8%, and France’s CAC 40 has risen by 1.1%. The UK FTSE has a smaller gain of 0.3%, while Spain’s IBEX and Italy’s FTSE MIB have each climbed by 0.4%. The French and German indices are nearing flat results for the week, boosted by today’s gains. The market feels stable after yesterday’s ups and downs, helped by steady S&P 500 futures.

European Stock Influences

European stocks will be affected by trade news and overall market mood in the near future. Key upcoming events include US retail sales and jobless claims data, which could influence market conditions significantly. We see the current rebound as delicate, especially since the VSTOXX volatility index recently spiked above 19 after dipping to around 12 this year. While the bounce is positive, we think traders should prepare for potential market turbulence. This could mean buying protective put options while the market is temporarily calm. The upcoming US economic data is a major factor that could easily disrupt this recovery. Recent reports showed US retail sales were flat in April, and weekly jobless claims have been over 220,000, indicating a slowing American consumer. We are preparing for a significant market shift after these data releases since a negative surprise could hit European sentiment hard.

Risks and Protection Strategies

The situation in France adds specific risk that cannot be overlooked. The gap between French and German 10-year government bonds recently widened to its highest since 2017, highlighting investor concerns about political uncertainty. This situation makes us particularly cautious about the recovery in Paris because similar political stress during the 2011-2012 sovereign debt crisis caused severe market drops. Considering these factors, we believe that buying protection is the wisest strategy for the coming weeks. We plan to purchase put options on broader European indices to guard against a downturn triggered by weak US data or political developments. This strategy will help protect our portfolios from significant downside risks we currently see. Create your live VT Markets account and start trading now.

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