Sell off is back in town and this time with vengeance. They say revenge is best served when it is cold, this is what bears have used this time, and caused the worse sell for the Nasdaq index yesterday since 2011. The same fear is filtering into the European markets today. This time bears are marking their territory strong and hard around the bulls.
The sell off is global and even the Nikkei index closed at six months low evaporating all those gains for this year. The Chinese economic data released overnight has not helped the situation either and has further raised the eyebrows that the country is in a dire condition and needs help from its Central bank. While the PPI reading remained fragile in the country, the CPI reading also came lower by 0.5% on a monthly basis.
The economic docket for the Europe shows that we have the final reading of German CPI for March and the forecast is for 0.9% which is lower than the previous reading of 1%. Mr. Draghi has acknowledged that the European region does have the inflation problems, but he is still not ready to use any bangers to combat this problem. The strength of the euro itself is presenting further problems and making the export from the region less attractive. However, one fact which is backing him up is that the general prices of the commodities such as the Arabica coffee, soybeans, wheat, sugar and corn are all up so far this year, and they must help the prices of general goods go higher and thus, helping the inflation. But, if this alone is enough, no this is far from enough.
The Greek bond auction certainly cemented one thing yesterday that the investors are willing to lend as long as the pay out ratio is good regardless of the debt to GDP ratio or any other political uncertainties that country might be facing. The fact is if you want to lend money in the euro region, Greece was attractive because investors are hardly going to earn anything by lending to Germany.
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