European markets are set to open higher this morning as the U.S. NFP data released on Friday have trimmed chances of the Fed increasing the rate this year. The data was really devastating and the only aspect which could have helped the Fed to raise the interest rate is not in their corner either. Much of the disappointment was in the labour participation rate, which plunged to 62.4% and confirmed that the labour market is very fragile.
Nonetheless, bad news is turning out to be a good news for the equity market and it has taken away one element of the uncertainty, which is that the Fed will not rush now to raise the interest rate. Therefore, investors do not have to worry about the two biggest central banks, which matters the most and that they are running in two opposite directions. Most odds are stacked in favor of the Fed raising the interest rate in March next year. If that is certainly the case, we could see investors getting in a position to beef up their portfolio and try to make the most of the upcoming rally.
The Chinese stock market is closed today for the bank holiday and will not open until Wednesday. Investors are certainly eager to see the response of equity market after the Fed data and their own economic data, but unfortunately, there isn’t much else can be done.
In terms of economic data, last week it was about the manufacturing data which was much softer and the U.S. was spineless too. This week will paint the picture in terms of services PMI. Spanish, Italian, France and German are going to release their own data this morning. All of them are expected to produce a number which is higher than their previous readings, the forecasts are Spain 59.7, Italian 54.8, France 51.2 and for Germany it is 54.5. The Eurozone services PMI is also due this morning and the data may just match the previous reading of 54. The UK’s services PMI will hit the wire at around 09:30 BST and the forecast is 56.4
DISCLOSURE & DISCLAIMER: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam