Investors Taking Cues From The US And Asian Trading Session While The UK

Investors Taking Cues From The US And Asian Trading Session While The UK Employment Rate And Italian Bond Yield In Focus

European markets taking their cues from US and Asian trading session

The European markets are trading higher during the early hours of trading, as traders took their cues from the positive finish on Wall Street last night and Asian markets built further gains for another day. As the economic calendar for the US market stays pretty quiet till Friday, geopolitical easing over Syria has overtaken the stage. The US markets rallied yesterday after the president Obama confirmed that the congressional vote on Syria has been postponed. The confidence around the improving Chinese economic data is helping the global markets further.

UK- Unemployment rate and BOE’s guidance

While the economic docket for the US is inaudible this week, but the same docket for the UK is full with firecrackers. The Claimant count figures are due early this morning and the forecast is for -21.2K while the previous reading was -29.2K. The unemployment rate and claimant count number started to gather an enormous amount of attention after the MPC voters decided not to touch the interest rate or the quantitative easing unless the threshold level of 7% is reached.

I will say that it does certainly appear odd if we look closely at the consensus numbers for the past three month and expectations for the unemployment rate is still stuck at 7.8%, representing no change from previous month’s reading. The BOE target level is 7 % and they have already confirmed that the bank will refrain from increasing the rate unless the unemployment rate falls below the 7%

Source: Bloomberg

The BOE projection is 7.1% in 2016, but I think that is way too liberal, given how the economic data is panning out, this will be reached well before and then we are talking about the interest rate increase and change in the forward guidance by the MPC voters.

Political uncertainty in Italy is increasing the Bond yield

Back in Europe, the political saga continues for the northern Europe, the Italian senate commission yesterday delayed their decision for expelling the ex prime minister Silvio Berlusconi from the parliament because of the mounting pressure by his allies, who are threatening to bring down the parliament, if such action takes place. This political uncertainty has certainly affected the Italian bond yield which is above the 4.5% and also above the Spanish borrowing cost for the first time during the past 18 months. Worse than expected, the GDP number for the Q2 released yesterday for the country, is a further evidence that this political turmoil is not certainly going to help the country and the politicians certainly need to sit down and think more carefully about the future of the country.

Currency

The CHF,JPY are trending up against the dollar while the EUR, GBP and NZD are trending down against the dollar on an intra day basis.

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