It would appear that the mixed performance of Asia’s markets has spilled over into Europe’s markets this morning with the FTSE100 finding support on the back of a rebound in the oil price, led by the oil and gas sector as Brent crude hits $50 a barrel ahead of today’s OPEC meeting in Vienna.
European stocks appear to be taking their cues from the underperformance of the Nikkei 225 which dropped sharply overnight after Japanese Prime Minister Shinzo Abe abandoned his plans to raise the sales tax next year.
Having previously insisted he would only postpone the tax rise in the event of the potential for a global crisis it has raised concerns that far from indulging in hyperbole as politicians are sometimes prone to doing, that some of these concerns may have a basis in fact.
While European markets lag behind this morning, market attention is focussed on Vienna as OPEC and the ECB meet for their latest meetings.
Expectations around today’s OPEC meeting are quite low with some speculation about the potential for some form of quota or freeze but the likelihood is that nothing will change, and why should it given that the current direction of travel for oil prices still appears to be going in the cartels direction.
Oil prices are also likely to be a factor at this afternoon’s ECB rate meeting, particularly in the context of any possible upgrade to the latest inflation forecasts. Since the ECB meeting in March oil prices have nearly doubled, and this could well get factored into any adjustment in next year’s forecasts.
The latest UK construction PMI for May appears to reinforce concerns about a slowdown in the UK economy dropping to 51.2 from 52 in April, however the effect on the pound has been negligible, not too surprising given the strength of the declines seen in the past couple of days. If services PMI also disappoints tomorrow then it probably won’t be long before we start to hear about the potential for rate cuts in the coming months from the MPC.
As far as US markets are concerned all eyes are on this afternoons ADP payrolls report as a potential signpost to tomorrow’s non-farm payrolls report.
Expectations are for a number of 173k new jobs to be added in May up from 156k in April.
Weekly jobless claims are expected to come in at 270k while on the company’s front we will be getting the latest monthly sales and revenue numbers for May from retailers Costco (NASDAQ:COST) before the opening bell and Gap (NYSE:GPS) after the market close.
The Dow Jones is expected to open 20 points lower at 17,769
The S&P500 is expected to open 2.2 points lower at 2,096.8
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