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EU Market Outlook - China Wavers

Last updated 8/10/2012 1:21 AM EST (GMT -5) 2 Comments

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Andrew Taylor

Market Strategist, GFT

Follow @ATaylor_GFT

Top Headlines

o    Weak Chinese Trade figures weigh on markets - Imports 4.7% & Exports 1.0%

o    Australia RBAs Quarterly MP statement ruffles AUD feathers

o    Will speculation of CH easing support markets?

o    Market Moves:

·          AUD lower; EUR remains range bound

·          Asian Continent Equities lower on CH data

·          Copper hit hard; Precious Metals and Oil drift off slightly

Asian equity markets are lower to varying degrees along with commodities and currencies reliant on anything Chinese as their Trade Balance figures for July showed a considerable reduction in both import and export numbers.

Those economies that have prospered from this giant had a taste today of what it is like to ‘Live by the sword and die by the sword’. The AUD, ASX2 00 and Industrial Commodities were hit hardest due to the direct reliance on Chinese production. The bigger picture global response was a little more tepid with an obvious preference for the downside but traders didn’t feel the need to panic sell ala the Aussie markets. This calm reaction by traders could be in response to the signs plastered all over dealing rooms saying ‘Bad News = Positive for Markets’ as expectations for stimulation by Chinese officials will form near term support post initial market adjustments.

Earlier the RBA released its quarterly Monetary Policy statement which on the whole suggested that the Policy settings were appropriate for now with forecasts for GDP adjusted higher and CPI lower. They did however stir the pot a little on the much talked about elevated levels of the AUD. Just the mere fact that the Reserve Bank felt it necessary to comment, has spurred on supporters that something must be done to bring the currency down. The calls will fall on deaf ears as the risks associated for a Central Bank to change tact to manage a volatile beast would see other well managed areas of the economy suffer.

For my take on the AUD at current levels check out my latest Market Watch article.

Outlook

European markets can expect to open lower with immediate pressure to remain on support levels as the weak Chinese data is factored in. Once the news has been digested by traders, medium to long term players should step in as the anticipation for Easing will gather momentum.

With the ECB action priced in, today’s German CPI, French IP and UK PPI should be watched for positive surprises that may give the ECB less reason to apply easing. This is unlikely but traders need to be aware of possible surprises.

Economic Events to watch:

Note: Times are in GMT

0600 GE           Jul CPI

0645 FR           Jun Industrial production index

0800 EU           Jul Long term interest rates statistics

0830 HK           2Q GDP

0830 UK           Jul UK producer prices

1230 US           Jul Import & Export Price Indexes

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

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Comments (2)

Darkdoji

August 10, 2012 at 07:04 AM ET

I know you do not need me to tell you that you are good at what you do. But when I see value I like to record my appreciation for whatever it is worth. Most analysts are fuzzy about issues and non-committal as far as outlook is concerned. They also bury their lack of insight in long and unnecessary prose - more or less rehashing what everybody already knows and leaving clients as confused as hell. This is not the case with you at all. Your presentations are compact and purposeful, you provide insight and confidence in your knowledge of the market. You are not afraid to be wrong and say what you believe is likely based on your assessments. I think you are the first on all those scores and therefore a valuable guide to traders. I can only wish you the best and tell you that I for one am happy for your refreshingly different approach.

PS: Your comments and insights on institutional trader behavior and outlook are especially helpful since most of us have no feel for the "pit" or the mentality of those players. Cheers

Andrew Taylor

August 13, 2012 at 02:08 AM ET

Thank you Darkdoji. I appreciate your comments and enjoy providing my a point of view that hopefully stimulates traders to think about what is going on whether they agree with me or not. Happy Trading

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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.