Asian markets were battered mostly overnight as traders are angst about the Chinese growth. It was a red carpet across all major indices over in Asia and a similar market action is expected over in Europe. Although, it is the end of the month and it is then when most mammoth hedge funds perform their portfolio positioning and this could result in more turbulence for the equity market today.
The sell off for the global equity market has been intense so far this year, but at the same time, for the last two weeks, we have seen some bargain hunters taking advantage of the situation as the US data have shown more signs of resilience against the feeble growth. If the US economic data, does start to print more stout reading, just like the last week, then the odds of a further rate hike will not be that far out of sight and this will only inflate the market volatility further.
The disappointment for the European market is on every front and it is not only filtering from the Asian market sell off, but also from much anticipated a positive outlook from the G20 meeting, which took place over the weekend. There is no doubt that last week, there was an element of hope that the G20 officials will be able to restore and assure the market participants that they have enough firepower to battle the current war of weak growth. However, the outcome was quite the opposite, as they miserably failed to address any issue and just did some smooth talk which wasn’t enough for investors. Hence, traders are going to punish the markets as a direct result of this.
Currency war and feeble economic growth are the two main chief concerns. China has become the slave of its economic data and the people bank of China’s policies are tailored somewhat according to them. What the Chinese officials tried during the G20 meeting was to assure other individuals that it is by no means their desire to weaken their currency, but at the same time, they are on the mercy of the economic data and any further slowdown will twist their hands further to weaken their currency.
In terms of economic data, we have plenty of fire crackers for this week and for today which will keep traders on edge. German retail sales data will kick start the day at 07:00 AM and the forecast is for 0.3%, which is relatively much more stronger in contrast to previous reading of -0.2%. Later on, we have the Eurozone CPI data also due and the expectations are not great, especially in the light of German numbers which dropped dramatically last week. The forecast for today’s EZ CPI flash estimate y/y is for 0.0%, while the previous reading was at 0.3%.
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