Inside Markets — Non-Dollar Markets

While US equities have managed to hold their own during the last three weeks, it’s important to recognize the outperformance in non-dollar markets, specifically China and Europe. The bullish equity impulse in China is largely linked to improved sentiment/optimism following DeepSeek’s recent accomplishment. Europe’s economy is more closely tied to China’s economy and European equity indices have a strong cyclical (Materials) component. EXB policy easing is also a near-term tailwind for Eurozone equity markets.

Recent upside in China’s equity markets could just be a sentiment-induced short-term rebound but it could also be the beginning stages of a global cyclical recovery. For the reasons cited above, Eurozone equities are considered a cyclical cross market. The EuroStoxx 50 (SX5E) has gained ~15% over the last two months to trade at a record high. The other cyclical cross market is copper, which has gained ~18% over the same period and looks ready to test a cycle high in the weeks ahead.