European markets are under heavy selling pressure this morning as Germany factory order data fell off the cliff. The data was battered and traders are still not elated with it. The forecast was for 0.5%, while the reading came in at -1.2%. What this really tells you not the story in Germany, but also the global story and this is going to keep the pressure on European markets.
The upcoming OPEC meeting on the 17th of April has become an even more intriguing event as the drop in oil prices continues. Investors are quite sceptical about this meeting. Could we see a cut in supply? This is the question which they are really interested in. The reality is that an orchestrated cut to supply may be an arduous task. The oil producing members have raised the stakes higher once again, and they are still focused towards their share of the oil market rather than the price of oil.
The fall in oil prices is having an impact on equity markets since they struggle to find a lead which can indicate a direction upon which to follow. The recent market reactions are all over the place and the wild fluctuations are a direct result of this. It’s like watching a constant tug-of-war between the bull and bear. If one competitor wins today, then their opponent will return with a vengeance and claw back a victory tomorrow and so on. We need stronger data and a clear message from central banks in order for the market to make up their mind in choosing which direction to follow.
It is a busy data day for European markets which will kick start with the latest PMI numbers for Spain, Italy, France and Germany. France has been suffering since the Paris incident as the tourism sector, along with many other services, took a major hit. However, the country is bouncing back and last month it has produced encouraging numbers with a reading of 51.2. It is predicted that France will retain that number today. As for Germany Italy and Spain, the forecasts are 55.5, 54.3 and 54.2 respectively.
The services PMI data is also due for the UK and it has been the primary driver for the economy. This figure is forecast to come in at 53.9. However, the fear of a Brexit has recently left its stamp all over this data, and last month’s reading was one the most feeble readings since April 2013. Finally, the US non-manufacturing PMI data, which will gauge traders’ attention, is forecast to come in at 54.1. This is a relatively better number in comparison to the previous number of 53.4.p>
Tata steel, has made a significant decision to exit the UK market after suffering hefty losses. The firm has decided that it cannot combat the strong headwinds any more after investing billions of pounds in investments. The firm has decided to put its business up for sale and they are willing to open negotiations with labour unions. This pull-out is an example of the ruthless strategies employed by the company in order to put its business back in order. All blame was pointed to its Chinese competitors. Even the firm’s Indian operation has had a brutal performance in contrast to their Chinese competitors.
By Naeem Aslam