The European futures are trading lower this morning as traders have continued to take some profit off the table. It is difficult not to take some profit when the markets have made their yearly high and the economic data stops supporting the bulls further. The ZEW numbers released yesterday for the euro region has raised some eyebrows about the strength of the economy. Having said that, the weak data should be a good news for the bulls as it increases the odds of further action from the ECB who comments have been one of the most major reason which has helped the European markets in their upward move.
The guessing game about the intentions of the ECB is back on track and the picture is not looking as gloomy as it was couple of days ago, especially when the chief of the Bundesbank, Jens Weidmann delivered far less QE loving comments yesterday as compared to the banks remarks which were released the day before. This is going to keep the traders on their toes and if the odds start to go lower for further easing from the ECB then it may be almost certain that this market perhaps struggle to move any forward.
We do have the GDP data out from France and Germany this morning. The Italian GDP data will also be released later. First let’s talk about the French figures, which was by all means extremely poor number, and confirmed that the country is still the problem child of Europe. The recent tax hikes in the country are not attracting much new investment, as we have seen from the data and clearly this is dragging the economy down. Going forward the picture still does not look very gloomy either, because the country is on track to make further spending cuts which could push the GDP even lower. The final number for the GDP came in at 0.0%, while the forecast was 0.4%
Germany on the other hand, has posted another strong number for its GDP. The data came in at 0.8%, while the forecast was at 0.7%. However, the GDP number was very strong as compared to the previous number of 0.4%. Germany is still the leader as we can see from the GDP number and the number has confirmed that both the construction and consumption has picked up in the country. Having said that, let’s not forget the headwinds for the country, because China is clearly still slowing down and a possibility of any QE from the Chinese government is next to none. The geopolitical tensions between Russia and Ukraine are further increasing the pressure for the country, especially when Russia is one of the biggest trading partner for the country. Therefore, we can say that the possibility of a rate cut by the ECB could be on the card during their next meeting, if not anything else.
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.