The US indices have started to show the divergence signs between them especially, yesterday, when the S&P 500 was able to log another record high, but other indices closed in a negative territory. Given the S&P 500 represents more broader sector of the market, it was clear that the general sentiment is positive among investor despite the mixed bag of data in the US.
Investors in Europe are mostly confused as we did see the similar assorted economic data. However, the anxieties about the German economy slowing down were certainly eased off, after it posted both the services and the manufacturing PMI much healthier than expected. However, we do know that the PMI data can be twisted and it is not completely dependable if you want to gauge the strength of the economy. The German ZEW sentiment has already printed a delicate print this week and today’s IFO number could validate those concerns. If we do get a fragile number, it could very well trigger some selling for the DAX index, which spiked up yesterday due to the PMI number. The common sense will dedicate that given that Germany is the biggest trading partner with Russia, sanctions on Russia will surely have bearing on German growth and the German companies must be rational for any additional investment and even worried about their current revenue which is dependent on Russian trade.
Back in the UK, the retail sakes data was slightly lower than the forecast, but overall, the retail sales data for the quarter is stronger than the Q1. We also have the Preliminary Q2 GDP reading due this morning for the UK, and this confirm how well the economy has been performing. Again a good number could trigger a rally for the FTSE 100 and Sterling as the chatter for the increase in the interest rate could pick up the fire again.
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