European markets are set to open where they left off last week ahead of the major economic data release this week. Traders pushed the Europeans markets towards the six years high last week on the back of the optimism that perhaps the PBOC will trigger some sort of stimulus package to help its economy which is on a constant downward slide. The optimism does not only stops here for the investors, but many have also started speculating that the ECB bank during their meeting this week will also initiate some measures to fight against the deflation pressures.
The volatility could spike up this week because not only that we have the ECB meeting and US jobs data due this Friday, but also we are going to close the first quarter of 2014, and will start seeing the earning results soon. Many of these poor earnings are going to have the bad weather stamp on them.
Smart money not only look at the economic indicators only to determine the health of the economy but also they gauge the earning results and try to find the early weakness signals in the economy. This is why we think that the volatility is going to be the major focus for the coming days.
Going back to our argument of a perspective of further easing from the ECB to combat the weak growth in the region, the reason that many are speculating this is because of the soft tone of the president of the German Bundesbank, Jens Weidmann. The bank has been against the idea of quantitative easing from the ECB for the past four years on a consistent basis and this new softness in their tone is pumping up the expectations of some sort of efforts from the ECB to boost the growth in the region and make the euro weaker.
But, the question which stands is that why the ECB will take such action now given that the bank only confirmed recently that there is no threat of deflation and the economic data released so far has also been singing the songs of life for the region.
The economic docket for the Europe will kick off with the EU CPI reading for the month of March and the expectations are for further decrease in the number to 0.6%. Obviously, a weak number here will increase the pressure on Mario Draghi. Later this morning we also have the mortgage and lending figures due for the UK. A bounce in these numbers will confirm that government mortgage lending scheme is boosting the housing market.