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EU Market Outlook - Hype On Hope Escalates

Last updated 7/30/2012 1:27 AM EST (GMT -5) 1 Comments

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Andrew Taylor

Market Strategist, GFT

Follow @ATaylor_GFT

Top Headlines

o    Fed Meeting takes a back seat to ECB actions

o    US GDP delivers mediocre results as expected

o    Eyes on Italian Bond Auction

o    Market Moves:

·          EUR retreats slightly on Fridays gains/AUD holds firm

·          Asian Equities follow US lead to post gains in light trade

·          Gold trades between $1620-23 for most of Asian session

·          WTi and Copper take out near term resistance

Asian equity markets have held on to another flow of decent gains albeit on light volumes as they account for the US positive lead on Friday.

Markets have reached a point that has priced in action by the ECB at its Policy meeting this Thursday. This sets up a situation where President Draghi will now have to back his words with action or we could see markets tumble quicker than they rallied. Traders have cast aside previous disappointments in anticipation that the ECB must deliver or else Spain and Italy will find themselves friendless in bond markets and will struggle to make ends meet on their own volition.

Today Italy will test investor’s confidence as it offers 5.5 Billion Euros worth of 3, 5 and 10 year bonds in an auction that should lend support to the current upbeat environment. They say timing is everything and as long as the auction attracts a healthy bid to cover ratio then we may see more risk market shorts being unwound as the hype on hopes escalate further.

The US posted mediocre GDP figures Friday which were expected and in reality will not shift the Federal Reserve’s view on Quantative Easing at its meeting on Wednesday. This has supporters of QE3 acknowledging that perhaps the ensuing September FOMC meeting is the more likely date for it to be announced. This Fridays Non Farm Payrolls will go a long way to determining whether this will in fact be true.

Outlook

Today the European session will start the week with a bang with economic insights to be provided by EZ retail PMI data, EU Consumer Confidence and Business climate. The strong moves higher have been a combination of renewed optimism and short cover trading that will continue to see dips in the market well supported. Traders need to be wary of any comments by officials trying to water down the hard line tone that has been set.

Economic Events to watch:

0810 EU           Jul Euro-zone Retail PMI

0830 UK           Jun Bank of England's UK resident’s deposits & lending analysis

0830 UK           Jun Monetary & Financial Statistics

0830 UK           Jun Sectoral breakdown of aggregate M4 and M4 lending

0830 UK           Jun Bank of England effective interest rates

0830 UK           Jun Bank of England lending to individuals

0830 UK           Jun BSA savings & mortgage lending figures

0900 EU           Jul Business & Consumer

1000 UK           Jul CBI Monthly Distributive Trades Survey  

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Comments (1)

Darkdoji

July 30, 2012 at 03:44 AM ET

"The strong moves higher have been a combination of renewed optimism and short cover trading that will continue to see dips in the market well supported. Traders need to be wary of any comments by officials trying to water down the hard line tone that has been set." Kindly do this regularly. Believe it helps when one keeps words like this in mind.

Now I go check Matt's technicals

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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.