European markets are ready to roar as there is still more fuel left for the bulls to push the markets higher. The fact is that if you look at the technicals, they will tell you only one affair, markets are oversold. Hence, traders are flogging some bargains off the table and still of the mind frame that there is still a lot of value in them.
The Japanese industrial production m/m released today was a complete disaster, but what traders are contemplating is that another bazooka is coming from the Bank of Japan and this has also broken the upward spiral for the Japanese yen against the dollar. However, how much effective that bazooka will be and more importantly, how long the effects will last is the main element what investors should be considering before buying the Japanese stocks. Nonetheless, the positive sentiment amid traders has dripped into the European futures and we could have a strong session today.
However, I am not too optimistic about the strategy which traders are really buying and if they believe another around of quantitative easing will help the Japanese stocks, as we do know that quantitative easing is a medicine which has reached its expiry rate and printing money and using interest to combat the flimsy growth is not the answer.
The European central bank’s president will be speaking later and traders will be benchmarking his comments very closely. Italy and Greece are under the spotlight. Italy has grown only 0.1% in the fourth quarter against the expectations of 0.3%, the momentum which we had in 2015 is fading. The efforts of the ECB president to fortify growth has no fruit left. The picture is even more revolting when you focus towards Greece because it has dropped back in recession and it won’t be long before it gets its season ticket again to remain in the spotlight. The recent strategy of the European Central Bank has raised many questions on the stability of the banking sector and if they can survive under the negative rate environment given that we already have too many challenges on the growth front.
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