Asian markets had another bumpy session and a similar session is ahead for European markets. This is despite the fact that we had a solid close on Wall Street. These markets are showing that they are running out of steam for any upward move if there is no stimulus announcement from central banks. Yes, just not one, but from most of central banks.
Yesterday, we had an agreement between OPEC and non OPEC members – at least some of them did come to attend the meeting and what they decided is to keep their output at current record level. Freezing their productions at Jan 2016 level is not something which investors were very pleased about and as a result they punished the price. Even though, the silver lining is that the production will not go higher from their record level and perhaps the supply glut will disappear, but the fear is that the agreement is really based on trust level.
This is an astounding element – trust each other after this agreement, because every affair of this conditional agreement has some thorny points for another member. There is a history of such events where some members did not work according to their agreement and a similar outcome on this occasion could also take place as well.
The US economy remains on the central stage for many investors and their trading decisions are based around the Fed decision. Although, the fed committee has started to acknowledge to some extent that global weakness is weighing on their economy and this could tie their hands for further rate hike, but you have to read very much between the lines to come up with this. The FOMC minutes are due later in the trading session and will remain very much the focal point for todays’s session. The Fed needs to send a very clear message to the market that a rate hike is only possible if economic data for the US is stout and situation overseas does not go out of whack.
The Empire State manufacturing data released yesterday was full of disappointment. The focus will be on the upcoming US industrial number and hopes will be if it can provide some abutment. The forecast is for 0.4%.
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