This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Global Macro: A Correction Looms in Europe

Stocks in this article: IEV FXE

NEW YORK ( TheStreet) -- European financial markets have outperformed most of their counterparts for the past month. As global asset markets look ripe for a correction, however, watch for Europe to lead the way down.

The two most pressing events out of Europe for the week were the release of industrial production data and European Central Bank President Mario Draghi's speech on Thursday.

Industrial production underperformed expectations, which is disheartening considering Chinese production was so strong. The lack of continuity calls into question global demand, which is bearish for an already overbought financial market.

In his speech, Draghi cautioned against giving too much weight to survey data versus actual hard data released by European government agencies. His modest tone was slightly bearish for European assets.

In order to put this into perspective. let's look at a chart of iShares S&P Europe 350 Index (IEV) below. European equities have been a global market leader for much of the year, racing to record highs in September.

The issue is not with the strength of the European economy, but with the technical nature of an overbought market.

As investors await the Federal Reserve's monetary policy decision next week, the uncertainty is sure to lead to a broad selloff for global equities. Look for next week to be a mostly negative week for this exchange-traded fund.

The next chart is of CurrencyShares Euro Trust Price (FXE). The euro has been weighed down by the same factors that have weighed on equities, and the strength of the U.S. dollar poses an additional risk to the currency.

Weak data stopped a strong euro uptrend this week, as did falling Treasuries.. Treasuries were bid higher during the Syrian conflict, acting as a safe-haven buy. As the fear subsided over the possibility of a Western intervention and investors focused more on U.S. monetary policy, the fall magnified.

Rising U.S. interest rates mean a stronger U.S. currency. The euro has failed to make new highs and looks to be rolling over at the 1.31 level. That leaves the euro with weak support on both technical and fundamental levels.

Next week could be the catalyst for a euro selloff toward its yearly lows if Fed officials introduce tighter-than-expected monetary policy.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs