Stock markets in Europe finished lower yesterday as traders remained wary of the European economy. The gloomy manufacturing updates from France and Germany on Friday were still hanging over market sentiment. Yesterday, German Ifo business climate index ticked up to 99.6 in March, and it exceeded the 98.5 forecast that economists were expecting. The announcement was a little encouraging, but it is worth remembering that the February Ifo reading was the weakest since early 2010. Italy is in recession, and Germany narrowly avoided a recession and France is stagnating, and that some of the economic indicators from the eurozone in 2019 have given traders cause for concern.
US equity markets started off on a negative note but shortly into the trading session turned positive, only to broadly finish a little lower on the day. The lack of major economic or political news caused US markets to experience low volatility. The increased chatter of a recession on the back of the yield curve inversion was a big talking point yesterday. Investors are aware the US economy is in rude health, and growth is tipped to cool in 2019, but at the same time they don’t want to ignore the moves in yield curve inversion as it been a reliable recession indicator.
Overnight, the Nikkei 225 rebound, and it recouped much of the ground that was lost on Monday, and the rest of Asia was broadly higher too.
Apple (NASDAQ:AAPL) held a stat studded event yesterday to launch a few news services. The tech giant revealed its much awaited, TV streaming service, a credit card, a news app and a gaming app. The tech giant is trying to diversify away from devices, and derives a higher portion of its revenue from services.
Westminster was in focus yesterday as Brexit is still doing the rounds. Prime Minister May reiterated the point that the default position is for the UK to leave the EU without a deal, unless something else can be agreed upon. It was the same old story at parliament yesterday, whereby there was a lot of talk, but not much was said. The gridlock continues as MPs aren’t in favour of Mrs May’s withdrawal agreement, and unless that changes, we are in for more of the same. Last night, MPs voted in favour to hold a series of non-binding ‘indicative votes’ and voting will take place on Wednesday. The voting should make it clear what the House of Commons want in terms of Brexit, but there is no guarantee that the EU will agree to their proposals so it might prove to be a waste of time.
The US dollar handed back some of yesterday’s Friday’s gains and the slip in the green back helped the gold market hit a level not seen since late February. The concerns about the state of the world economy encouraged gold buying so some dealers were seeking out safe haven assets.
At 7am (UK time) the German GfK consumer climate report will be released and the consensus estimate is for it to remain unchanged at 10.8.
Charles Evans, the head of the Chicago Fed will be speaking at 10,30am (UK time). Yesterday, Mr Evans said he understood investors’ concerns about US bond yields, but he remained optimistic on the US economy.
The Bank of England’s Ben Broadbent will be speaking at the public administration and constitutional affairs committee from 11am (UK time).
The US will announce some economic indicators in the afternoon. At 12.30pm (UK time), the housing starts will be released, and traders are expecting a reading of 1.21 million, and that compares with the 1.23 million reading in January. The consumer confidence report will be released at 2pm (UK time), and dealers are anticipating an increase to 132, from 131.4 in March.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1176 area. Resistance might be found at 1.1448.
GBP/USD – has been driving higher since early December, and if it holds above the 200-day moving average at 1.3000, it might retest the 1.3380 area. The 1.2775 area region might act as support.
EUR/GBP – while its holds below the 200-day moving average at 0.8842, its outlook is likely to be negative. 0.8471 might act as support. A rally might encounter resistance at 0.8800.
USD/JPY – has been edging lower since the start of the month and a break below 109.50 might bring 108.50 into play. If the wider rally continues, it might retest the 112.00 area.
FTSE 100 is expected to open 29 points higher at 7,206
DAX is expected to open 50 points higher at 11,396
CAC 40 is expected to open 20 points higher at 5,280
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