European markets are a sea of red yet again as we approach the close of play on Monday as oil stocks yet again take the full brunt of the risk off trade, despite oil prices rallying from their lows. Earlier in the session oil tumbled to 11 year lows with the before recovering somewhat to post some gains on the day. The overall risk off story though is one that is likely to continue this week as we approach Wednesday and the all-important Fed meeting.
Traders are yet again likely to be holding back from taking any real direction decisions in the next couple of days before the announcement, and even though we are all expecting the Fed to act, you can never be too careful as the SNB showed us almost 11 months ago. Wednesday will tell us just how much central banks care about global market stability, as anything less than a 25 basis point hike could well be catastrophic for the markets across the board.
Today saw a relatively quiet economic calendar with industrial production out of Europe the major headline data print. The number however showed signs of life in the Eurozone economy with a reading of 0.6%, higher than the 0.3% and much better than last month’s negative reading of -0.3%. That was followed by Mario Draghi speaking at a conference in Italy, although nothing much was mentioned as he reiterated that the ECB’s inflation target was on course. On the FTSE100 stocks continued lower despite traders staying away from risker assets.
The day’s movements kept the FTSE below the psychological 6,000, with the big miners trading lower lead by Glencore (L:GLEN) and Antofagasta (L:ANTO). Lonmin (L:LMI) was one of the biggest fallers of the day trading down over 19% after a hugely discounted rights issue was shunned by investors.
Overall we are likely to be looking at a fairly subdued start to the week as the Fed dominates everything and everyone, forcing traders into a very much risk off position. Despite that tomorrow sees a lot of data due for release with some key reading from the UK, Eurozone and US. Although this data could stll cause some big moves, the volume could well be light or the positions short lived as nobody wants to take a position in to Wednesday.