Eurostoxx futures fell by 0.2% in early European trading, with German DAX futures also dropping by 0.2%. In contrast, UK FTSE futures remained unchanged at new record highs. US futures stayed steady after Wall Street experienced strong gains late last week. European stocks continue to perform well, with Spain and Italy’s benchmark indices reaching their highest points in almost 20 years.

Market Consolidation After Rally

European futures paused on August 25, 2025, indicating a consolidation after last week’s strong rally. This rally was fueled by hints from the US Federal Reserve about a more relaxed interest rate policy, which lifted markets worldwide. The current stability suggests that traders are evaluating whether these new highs can be maintained. Market volatility is at multi-year lows, with the VSTOXX index for Euro Stoxx 50 options around 14. This low level means option premiums are relatively cheap—a situation not seen since before the significant rate hikes began in 2022. This low cost offers traders a chance to buy protection or position for future moves without significant upfront costs. The strength in European stocks is backed by easing inflation, with the latest inflation figure for the Eurozone in July 2025 at 2.1%, close to the ECB’s target. This environment supports the record highs in the UK and the near two-decade peaks in Spain and Italy. However, German futures show slight weakness, reflecting recent manufacturing PMI data for August, which indicates the sector is barely expanding at a reading of 50.5.

Strategies For Record Levels

With indices at or near record levels, it’s a smart time to think about protective strategies. Purchasing put options on the Euro Stoxx 50 or DAX can provide inexpensive insurance against a possible 5-10% correction in the coming weeks. This approach allows traders to keep their profitable stock positions while managing downside risk. On the other hand, the dovish stance from central banks continues to support stocks. For those who believe the market is just experiencing a short pause, starting bullish positions like bull call spreads could be beneficial. This strategy enables traders to profit from a gentle rise while keeping their costs defined and limited. We observed similar market behavior during the recoveries in 2023 and 2024, where brief pauses typically led to further gains. The focus will be on the upcoming economic data in early September. Any signs that economic growth is weakening more than anticipated could quickly introduce volatility back into the market. Create your live VT Markets account and start trading now.

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