IS this a profit taking or something more Vulnerable
European stock markets are trading lower during the early hours of trading. Markets are mirroring these losses which took place overnight in Asia on the back of a news that there could be a military intervention by the US in Syria. The news has sent the shocking waves around the globe and investors have decided to consider this as an opportunity to take profits off the table. However, there is a question looming over this argument, if this is only a profit taking opportunity or something bigger is shaping up under this curtain given that the US markets have lost all of their gains which were made during the month of July
Good news is good news and bad news is a good news, not working anymore
There are anxieties in the market that if Fed will pull the trigger on the tapering program in September and good news is a good news and bad news is good news is not driving the markets anymore. The evidence of this was seen in the market during the most recent run of poor economic data where the market is selling off regardless if we are getting the positive number or the negative numbers. Yesterday’s consumer confidence number was a clear message to the market when the economic data did beat the expectation of 79.6 with the final reading was 81.5. The positive reading should have stopped the sell off in the US given that we had a very cautious outlook from retailers.
US pending Home Sales may fall further
It will be very interesting to see if the cloud of this argument will continue today when the US pending home sales data will be released at 14:00 GMT. The expectations are for 0.2% given that we have seen a drop of 13.4% in the US New Home Sales during the month of July. I would say that I am not so positive that we will have a positive reading later today given that a recent rise in mortgage rates.
Difficult decision on Austerity for Dutch Officials
The sell off in Europe which we are seeing today is mainly on the back of Syria news, but it also important to look at other issues within the Europe. Among other things, the main focus within the Europe is on the Dutch government’s decision that if they are taking further austerity cut in their budget which could be nearly €6 billion. This will not be an easy decision for the officials, given that the country is facing a rising unemployment rate and growth is derailing further and further.
German Elections and Angela Merkel
Angela Merkel is still on a continuous path of defending her position in the upcoming election and blamed the Greece situation on the previous chancellor by saying that such a country should never be allowed to join the euro. However, one may say if such is the situation then certainly there should be the same argument for Spain, Portugal and Italy!
Carney’s speech will be scrutinized by the market
Mark Carney will be put to test once again when he will deliver his speech which is due later today. Given that the country has not only escaped its triple dip recession, but also has raised its GDP forecast, there are some serious expectations that Mr governor will deliver forward guidance for the sterling economy. The market will certainly scrutinize the contents of his speech however, giving a forward guidance may not be that easier for the governor, given that the country has a string of improving economic data. Moreover, the chatter continue about further QE so that the bank can keep the rates low, but if such chatter can be implemented remains a different question because it could be a massive challenge for the officials when the economic data is giving an evidence of an improving economy, and to maintain the Bank’s mandated inflation target.
The JPY and CHF are reversing their trending up against the dollar while the NZD, AUD and GBP are trending down against the dollar on an intra day basis.