Europe has started in positive fashion, despite poor numbers in China and the confirmation that the state is to lay off 5-6 million staff in wide reaching cost cutting measures. Despite the poor numbers, the major indices across Asia managed to post some fairly solid gains, helping Europe to lift its positive start to the week and push the major European stock markets towards monthly highs. A solid oil price and a raft of M&A data have helped the stocks to push on with the heavily weighted commodity stocks leading the way. In the UK, talk of ICE potentially tabling a bid for the L:LSE has helped to push the stock and UK index higher.
As we push through the week, focus will shift to the economic calendar, with the payrolls capping the week off on Friday. Before this, let's look towards PMI data out of Europe. EZ PMI came higher than expected but largely in line with expectations. The fact that numbers have somewhat stabilised from an economic standpoint should please the ECB, but not necessarily change their stance as we approach the ECB rate decision. It seems that all European data is still in focus as expectations grow for more stimulus and potential negative rates.
Comments overnight from the Fed’s Dudley have been in focus after US markets finished lower. Dudley said that he saw the US inflation target of 2% hard to get to in the near term and that the balance of risks is tilting to the downside for the US economy.
Oil prices will be the focus before the US ISM data out later this afternoon. Those trading CAD should look towards 1.30pm and the Canada GDP figures.
Data is pretty thin on the ground after today and until Thursday and Friday for the big job numbers. It seems that markets are in a holding pattern at the moment, fliting from risk on and risk off on a daily basis with no real direction. The fact that oil is trading between $34 and $26 is helping to stabilise the markets with $30 looking like a fair price in the short to medium term.