Today is the final day of the third quarter and much of the focus will be towards the performance of this quarter, which is by no means stellar at all. In fact, it has been two months in a row that the European markets are under selling pressure. Although the positive momentum from Asia is set to filter into the European session, but it will not be able to change the face of the current quarter.
Asian markets enjoyed an up day today after the Nikkei index tanked yesterday and the Shanghai index lost nearly 5.7% of its value during this month.
Investors will be rethinking their strategy going forward because one thing is for certain that the strategy, which was working since 2009 – every dip is an opportunity, is losing its lustre. Wait and see or stay on the sideline while the Fed decide on their rate hike action, could be a new popular strategy, as traders make their mind how to play these markets. Cash is king could surely be the new state of mind among investors and this could impact the market volume.
More stimulus from Japan, China and from the ECB will be new slogan which traders will be shouting, because all three regions are suffering with the same disease- a meagre economic growth. Commodity prices have experienced their peak in 2011 and since then it has been a one way trade. The question is when we will see the bottom in the like of oil, copper and aluminium which are the backbone of the manufacturing sector.
Economic docket has plenty of firecrackers today which will keep the day traders excited. The UK final GDP number for the Q2 is due this morning and the forecast is for 0.7%. A number which is stronger than the forecast may give a little upward push for the sterling against the basket of currencies. The German retail sales data are also due which will deliver the consumer mentality . The forecast is for a rise of 0.2%. The CPI number for the country dropped into a negative territory yesterday and the expectations are perhaps it may stimulate German buyer to spend a little more as their purchasing power gains. The unemployment data for the country will also be released and the expectations are this number will remain steady at 6.4%.
The Eurozone unemployment number will have significant importance amid investors as the European Central Bank will decide on its further stimulus package during their meeting next month and the forecast is for 10.9%. The bigger focus obviously will be towards the ECB’s main mandate which is inflation, and the Eurozone’s CPI data will deliver more information on this. The forecast is for 0.9%. The Italian unemployment data will also hit the wires and it could print the number which may be lower than the previous reading of 12%.
Back in the U.S., it will be all about the ADP number which will set the tone for the upcoming non farm payroll number due on Friday. The forecast is for 190k which is very much inline with the previous month’s reading.
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