Asian markets are getting battered and following the footsteps of the US trading session. The optimism which lifted the mining stock, especially iron ore and oil has faded and investors have decided to book some profit off the table, as the trade started to topple. The rally was instigated on the back of this element that supply will be constrained and adverse inventory data numbers will aid the price to inflate further. Although, this trade played very well for a few days, but now investors have caught up to the reality that only curbing supply is not going to skew the odds in their favour, as what they require is the demand side of this equation to improve as well.
The Chinese trade balance number had a very numb reaction at the start, nonetheless, as the anesthesia wears off and investors do realise that the People Bank of China has not shown any new prescription for further quantitative easing, the sell off trump the trading session. Although, it is an immensely bizarre and comic phenomenon that there are always expectations for some abutment from the People Bank of China, even if someone sneezes in China. Having said that, under the current circumstances, it is highly anticipated that the bank should assure that they have the tools at their disposal to combat this scanty growth.
What traders are really anxious about is that how intense and vivid the slowdown in the Chinese economy is, because any feeble reading is very much associated with hopes of more aid from the central bank, and if the bank does not nod to their wish, the sell off is the ultimate outcome.
Back in Europe, the trading session will be coloured very much Asian sell off. The euro will be currency will remain under focus ahead of the much anticipated ECB meeting. There is no doubt that expectations are sky high from the bank and it just pushes the affairs on the cusp of disappointment. In terms of economic data, the U.K manufacturing PMI number is due later in the morning and the forecast is for 0.2% incorrect to previous reading of -0.2. This is optimistic forecast and if we do get the actual number hitting this mark, it could provide a boost for the sterling.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam