European futures are trading lower after finishing lower last week. Traders are certainly ready for another volatile and action packed week- especially all eyes are focused towards the upcoming Chinese and the U.S. data. But, before we dig into this, it is important to emphasize the significance of this weekend’s event.
Although, Greece has the occupied the back seat when it comes headlines -at least for the time being, but another major headache has emerged for Brussels over the weekend. Yes, it is the Spanish election outcome over the weekend during which Catalan independent party has become victorious. We all know that the motive of this party is to look for independence from Spain. During the campaign, the politicians from Catalonia made it this crystal clear that their mandate is primarily based on independence. Now, given that they are in the parliament with a firm grip, the independence of Catalonia could pick up steam if the economic situation deteriorates any further.
Brussels, undoubtedly already had too much on their plate with Greece threatening to leave the euro, and now with Catalonia with its own mandate, it will only make the matters more challenging.
Another imperative aspect which will keep the markets more jittery is the repositioning of portfolios as the third quarter approaches towards its finish line. A number of hedge funds and large institutions re-balance and reposition their portfolios to take advantage of the earning season. This usually results in large swings in the market which could make the retail investors more panic about their positions- not knowing that big sharks are just getting ready for their party.
Janet Yellen’s last week’s comments will come under focus once again when the well known dove member Charles Evan and William Dudley will speak later this afternoon. The focus will be towards the Fed confidence level, the strength of the economy and when will they increase the interest rate. Remember under no circumstance, the economic condition warrants this low interest rate and this pressure is mounting on the Federal reserve committee to justify their action. The Fed will pay close attention to the upcoming Chinese Caixin manufacturing data (due this week,) as one of their excuses for not lifting the interest rate during September was due to the paleness in the global economic conditions.
In terms of economic docket, the U.S. personal spending and income numbers are due later this afternoon, which could set the tone for the U.S. trading session for today. Increase in spending will confirm the level of confidence among consumers. The forecast is that the personal income and spending may rise by 0.3%.
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