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EU Market Outlook - USD & Corp Earnings Leave Their Mark

Last updated 8/16/2012 1:44 AM EST (GMT -5) 0 Comments - Add your comment

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Andrew Taylor

Market Strategist, GFT

Follow @ATaylor_GFT

** I will be out of the office tomorrow so my next commentary will not be until Monday**

Top Headlines

o    Positive US sentiment remains focus ahead of further data

o    UK retail sales, EU Harmonised CPI & German Ifo Economic climate on data card.

o    Premier Wen comments on low inflation offers room to manoeuvre on MP

o    AU Corporate Earnings provides boost to local shares

o    Japan welcomes lower Yen on Dollar strength

o    Market Moves:

·          AUD and EUR remain in tight ranges; USD powers ahead vs JPY

·          ASX2 00 up on Corp Earnings; Nikkei up on demand for exporters

·          Commodities have quiet session;

·          Oil holds onto gains caused by Middle East tensions and reports showing steep drop in US oil stockpiles

Markets that were unable to find its own story outside of the current global macro themes found themselves watching the clock waiting for the European session. Those that did find reason to buck the trend did so with gusto with intraday moves to be proud of.

Australian and Japanese equity markets stole the show as comments by Chinese Premier Wen that their current inflation levels have given more leeway to manoeuvre its monetary policy, set up a bullish environment of which both the Aussie and Japanese markets took full advantage of.

The ASX2 00 found valid support thanks to positive earnings reports led by the Commonwealth Bank of Australia which recorded a record cash profit for its last financial year. To hear a bank making record profits in this global environment only adds to the Aussie fairy tale that continues to see offshore investors buying into Aussie assets by the bucket load.

The Nikkei saw an even stronger rally thanks to a weakening Yen. Capital flowed solidly and consistently for Japanese export companies as the feel good US story continues to drive the USD higher against the Yen.

In yet another lesson on why ‘natural’ economic progression is the only foundation on which to build real results, global leaders need to stop hiding behind the liquidity of the Central Banks and spur on activity on a fiscal level to provide the positive sentiment needed to turn the massive wheels of demand. Just my humble opinion!

Outlook

In a similar situation to yesterday, European data will be about whether the ECB is less likely to take action against a market that has priced in that they will.

The real variable is the current cautious shift in US sentiment. Should tonight’s US Housing and Jobless Claims fall in line with expectations (or better) then we will see a few more join the growing groundswell that are preferring to take up USD in favour of Yen and Euros in the short term.

Economic Events to watch:

Note: Times are in GMT

0830 UK           Jul UK monthly retail sales figures

0830 UK           Jul UK monthly automotive production figures

0900 EU           Jul Harmonised CPI

1000 GE           3Q Ifo World Economic Climate

1230 US           Jul Housing Starts and Building Permits

1230 US           Aug 11 Unemployment – Initial Claims

1230 US           U.S. Weekly Export Sales

1400 US           Aug Philadelphia Fed Business Outlook Survey  

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.