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EU Market Outlook - Opportunity To Back EU Summit Proposals

Last updated 7/9/2012 1:32 AM EST (GMT -5) 0 Comments - Add your comment

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Andrew Taylor

Market Strategist, GFT

Follow @ATaylor_GFT

Top Headlines

o    Global growth concerns see Risk aversion trade

o    China misses expectations on Inflation main risk event still to come

o    Japanese Machinery Orders prints its biggest fall since 2005

o    Market Moves:

·          EUR/USD holds above 1.2260; AUD/USD holds above 1.0180

·          Gold, Silver and Copper keep in tight ranges with low volumes

·          WTI up slightly but capped at $85

Asian markets traded lower Monday as it played catch up to Friday’s downbeat US employment data and remained pressured as the region’s top two economies released data below market forecasts.

With global economies clearly on the back foot, this week’s data from China will give a clear indication of how soon this resource giant will be able to impact on global demand. With Europe out for the count and the US not far behind, growth hopes fall squarely on the Chinese economy. Today we saw a fairly benign inflation snapshot which for markets was widely expected. Fridays GDP, Retail Sales and Industrial Production are seen as the main event for a market that is currently incessant on global growth. With hopes running high, which is more from desperation than logical thinking, we may see further disappointment once this week is done and dusted. The PBoC’s uncanny ability to provide stimulatory measures just days prior to negative reads should be seen as a major clue and today’s inflation data confirms that further easing won’t be too far away as they fight to get through this next quarter intact.

Japan added to the regions concerns as their Machinery Orders (MoM) for May saw its largest fall since April 2005. Markets were expecting a modest decline of -2.6% only to see drop of -14.8% flash on the screens. If that wasn’t bad enough their Current Account balance for the same month missed expectations also. The usual suspects of global slowing has been to blame but with the BoJ expected to ease their monetary policy yet again on Thursday it really shows that Central Banks worldwide are clearly out of options. 

It is even more apparent than ever that the ‘saving of the world’ will not come from the reactionary Central Banks. They cannot provide what the market is looking for as we trade in disbelief at the lack of urgency from EU leaders to address the issues at hand.

Outlook

Today will see a window for EU financial leaders to provide the markets with some much needed detail about the proposed action plans that were delivered at the EU Summit. Expectations are low and scepticism high which will keep a lid on rallies and should set the overall tone for a week of safe haven trading. Micro data risk will come in the form of Germanys Manufacturing turnover and foreign trade with no surprises expected.

Economic Events to watch:

0500 US           Chicago Fed Pres Evans speaks

0600 GE           May Foreign Trade

0600 GE           May Manufacturing turnover

1230 EU           ECB President Draghi meeting > speech

1400 US           Jun Employment Trends Index

1530 UK           BoE’s Paul Tucker interviewed by select committee MPs

1555 US           Fed Pres Williams

1900 US           May Consumer Credit

N/A EU            Eurogroup Meeting of euro-zone finance ministers

For more intraday analysis and trade ideas, follow me on twitter @ATaylor_GFT

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About The Author

Andrew Taylor's financial markets career started in 1991 in the interbank FX market,where he worked for one of the largest banks in Australia. Andrew then went on to trade on behalf of some of the biggest global banks, working across five of the world's major financial hubs: Sydney, New York, Singapore, Auckland, and Tokyo.

His more than 20 years of experience spans market borders and asset classes, covering global equities, commodities, options and futures. Andrew's wealth of trading experience and ability to communicate with traders of all levels has put him in demand as a first point of contact for clients and the media alike when seeking information and guidance.