Asian markets rose with the US Dollar overnight as Crude Oil prices and Gold fell away after another busy day in equity markets. Us markets had a mixed session in the end yesterday with the Dow managing to post small gains yet the S&P 500 falling away slightly. The moves bring to an end a fairly aggressive run that has seen big falls and uncertainty around the equity markets.
However the rest bite may only be a brief one as investors remain nervous around equity markets as they continue to show signs of weakness at the very same news stories that have in the past caused no issues. However Asian markets did manage to rally despite poor data from China, the CPI inflation figure fell to 1.6%, it’s the lowest level in 5 years showing yet more signs that the Chinese economy is slowing down.
Of course this number comes after disappointing CPI numbers out of the UK and a day before the all-important Eurozone CPI readings tomorrow morning.
Today’s session will be dominated by numbers out of the UK and Eurozone yet again as CPI out of Germany is followed by the unemployment reading from the UK. Germany remains one of the big problem areas for Mario Draghi ahead of his speech this morning. Yesterday’s negative ZEW survey showed that confidence is at an almost 3 year low, with growth and inflation not faring much better.
Today we will get the CPI reading and with no movement expected in the 0.8% rate there is no doubt that will be seen as a positive result. Mario Draghi will no doubt face questions over the next step for the ECB when he delivers a speech this morning and any hint towards a round of QE will be seen a positive move by the markets and the only logical next step.
With a rather different picture the UK government and BoE await the latest jobs report in the UK as expectations rise that the unemployment number will continue to improve and now the all important average earnings number is also expected to show small signs of improvement. Governor Mark Carney outlined average earnings as a key figure that needs to rise before his team start to consider a rate hike in the UK, despite a raft of positive economic data.
This seems like a sensible approach with and with that number only creeping to the upside over the last few months the BoE may well feel they have a little more time to play with. Mark Carney also mentioned last week that the BoE will not take into account general election timelines when making his decision over an interest rate hike.
That is an interesting comment after sceptics out there, including myself, have been asking whether a rate hike before the general election would be the final nail in the coffin for the Conservative party in May 2015. One thing people do not like is the potential that a government could be taking money out of their pockets just as they step into the ballot box.
All in all today’s session as the potential for yet more in the way volatility with the key economic announcements due for release. Investors will also be looking towards earnings season in the US to give equity markets a further break. Yesterday saw J P Morgan Chase & Co (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and Intel (NASDAQ:INTC) all post fairly strong earnings helping to boost belief that this strong rally isn’t quite over yet.
Ahead of the open we expect to see the FTSE 100 open lower by 12 points with the German DAX lower by 7 points.
DISCLAIMER: Any views or opinions presented are solely those of the author and do not necessarily represent those of Alpari (UK) Limited, unless otherwise specifically stated. This content does not constitute investment advice.