Global market enjoys reprieve after a heavy sell off
European stock markets are trading higher during the early hours of trading. Despite these mild gains in Europe which have been filtered from the Asian and US markets, the volatility in the markets remains extremely elevated as the possibility of a military strike on Syria is still a concern for the investors. Rising crude oil prices are certainly creating a threat for the global recovery, and if such situation continues, it could be difficult for the biggest economy of the world, US, to start the tapering program. There is no doubt that the US market did enjoy a bit of reprieve yesterday which was mainly due to an increase in the share price of oil companies.
Preliminary GDP data would fuel tapper talk
Tapering talk will take further fuel when an economic data will be released this afternoon which is the US Q2 GDP revision. The forecast is for the upward revision for this number to 2.2% from previous reading of 1.7%. However, there are certainly doubts if such is possible, given that the recent run of poor economic data which has been coming on the weaker side. The recovery in the US markets is heavily based on the housing market and the data released yesterday for pending home sales has without doubt surprised the market when the final reading came in at -1.3% while the previous reading was 0.2%. Nonetheless, it is also a reality that the country’s deficit is also shrinking and the recent reading has shrunk to $34 billion from the previous reading of $44 billion.
Mark Carney’s polices moved sterling higher
Despite the fact that financial market is extremely jittery about the military strike on Syria but Mr Carney was able to deliver anther excellent speech yesterday in Notimgham. His forward guidance has assured investors that interest rates will remain low and there is no intention by the Bank of England to increase in near future. This news certainly pushed sterling up from its lows of the day and it is still trading well above that level. His assurance also increased the confidence for investors when he confirmed that the bank may not withdraw its support automatically once the unemployment threshold of 7% reached, but the MPC officials will reassess the market condition and fine tune their policies accordingly.
Mr. Carney’s polices could without a doubt help the British economy to become more stronger and one of them was his confirmation that MPC officials are open to further stimulus if there is any such need. The banking stock could also be on the verge of another bull run after his commitment to relax the liquidity rules for those banks which are meeting 7% capital level.
Unemployment Rate increased and Angela Merkel’s challenges soared
On the European front, Angela Merkel’s electioneering campaign remains in full swing as the country is approaching to the full employment level. German unemployment numbers released today increased unexpectedly by 7K, while the forecast was a decrease by 5K. This has certainly created more challenges for Angela Merkel who is trying to convince Germany that she is the best person to run the country. Having said that, it is a fact that there is no recession in the country and thanks to Angela Merkel and her policies which has pulled the country out of a recession on the path of a stronger growth because, let’s not forget that Germany certainly has a spill over effect for rest of the Europe.
The SEK,JPY, CHF and DKK are trending up against the dollar while the EUR,GBP are trending down against the dollar on an intra day basis.