Eurostoxx futures were flat in early European trading, showing a cautious mood after recent gains in European stocks. German DAX futures stayed the same, French CAC 40 futures increased by 0.1%, and UK FTSE futures remained unchanged. Wall Street’s drop overnight was balanced by strong tech shares. This week, European indices, including the DAX, have performed well, nearly recovering last week’s decline of over 3%. Looking ahead, ongoing trade talks between the EU and the US, along with the European Central Bank’s upcoming outlook, will shape market trends.

European Markets Pause

European markets are taking a breather after a strong recovery this week, with the German DAX making up for last week’s losses. This quiet trading is common in August, but low trading volume can lead to sudden changes. The Euro STOXX Volatility Index (VSTOXX) has come down to around 18 after hitting over 25 last week, indicating that some uncertainty still lingers. The European Central Bank’s next decision after its summer break is a significant focus right now. The recent Eurozone CPI reading for July 2025 was a stubborn 2.8%, putting pressure on the ECB to keep its tough approach. This scenario makes long-dated call options risky, while strategies like collars or put spreads on indices like the DAX may provide a buffer against a hawkish surprise in September. We are also closely monitoring the upcoming EU-US trade negotiations that are set to resume next month. With approximately $50 billion in potential tariffs still under discussion, sectors such as automakers and industrials are particularly vulnerable. Traders might think about buying puts on these sector-specific ETFs to protect themselves from negative news from the talks.

Central Bank Meetings

We experienced a similar trend in the summer of 2023, where a quiet August led to a volatile September due to central bank meetings and new policy signals. For now, with significant events approaching, traders should consider selling short-term options to earn premiums from the current calm. This capitalizes on time decay while waiting for clearer market direction following the summer lull. Create your live VT Markets account and start trading now.

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