Bulls have decided to keep the rally on over in Asia on the back of optimism that more quantitative easing will be on the way from the Bank of Japan after it released its GDP reading which confirmed that the economy is in dire shape. Although, such a rally may have very flimsy ground to stand on, as the abenomics has failed to fortify growth. Nonetheless, the Japanese economic data is mainting the pressure on Yen on the back of hopes of more easing measures.
Over in China, we have not cited a strong rally nonetheless, but it has kept the Shanghai index in a positive territory for the past two days.
Traders over in Asia are also optimistic after the speech of the European central bank’s president yesterday who confirms that he is standing stout against feeble growth and assured that he not only has the will power, but also enough votes from his colleagues to unleash more quantitative easing to spur growth. We are not sure if the president should be that confident about his QE measures, because most of the economic data released for the fourth quarter has been nothing but a pure disappointment. Even though, the president does cogitate that most of the luster was taken away due to the affairs which were beyond his control- such as, rout in the oil price, but surely it has saved more money for consumers, which is not entirely visible.
Mr Draghi has tried to sent a very clear message to markets yesterday that European banks are a lot more robust today and fear of another recession is overplayed in the market. The quest is if investors are going to buy into his argument and will envisage that the current sell off is actually an opportunity to buy given how far the valuations have come down with respect to their book value. If he can reinstate the confidence in the banking sector and clearly shows that negative rates will not adversely impact the banking sector, then the current opportunity does surely represent a good deal for traders.
The German ZEW sentiment data is due at 10:00 GMT for the biggest economy of the Eurozone. The manufacturing sector is miserably suffering in Germany and this number will provide an appropriate guidance. The forecast is for 0.1 which is sharply lower in contrast to the previous reading of 10.2. But, before this, we will also have the UK CPI data which is due at 09:30 GMT and the forecast is for 0.3%.
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