European markets are trading lower ahead of the upcoming ECB meeting. Although, this meeting is expected to unleash another round of quantitative easing for the euro zone and hopes are high that perhaps another rate cut will also be taking place. However, a rate cut is some affair which very much behaves like a double edge sword, because on one hand, if you have rates going lower – further deep in the negative territory, the banks will be encouraged to lend more, but at the same time, these banks will not be able to pass the negative rates to their public. Thus, the stout quest is about the health condition of the banking sector and all of the “what if ” scenarios are considered.
Commodities have been in the headline yesterday and this helped the US stocks to move higher. However, investors are a little wary to jump in this arena with both feet, because the element of stability is still not stout enough. Yes, there is no denial that the inventory side of the equation is being balanced and there were more promises from the People Bank of China for more stimulus which will aid their decision to achieve the growth target of 6.5-7.0%. This is helping commodities for now, but if this effect will last long, that is the question worth asking about.
Last night, we had a economic data for China, what it has confirmed that both the import and export number was below the expectations. The import number took a further beating and declined by 13.8% and the export print was also equally abate with a reading of 25.4%. Nonetheless, the limitless pledges from PBOC continues to spur some growth and fortify his relation.
One of the commodity which is worth talking about is without any doubt the oil price. It has been very much on the tier and investors are very optimistic, perhaps a way too much, about the upcoming OPEC meeting. Hope is that other producers will join other leaders in keeping their production constant and it will not go higher from their record levels. However, oil breaking the 40$ level Does mean that bullish bets are strong, but at the same time we are not way off from a level where there is a major resistance. The mark of $ 42 and $45 represents a major threat for the current trend.
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