European markets have continued the new week in a firm negative territory by building up their losses which they experienced the last week. It appears that this momentum has still a lot of steam left and we may see more correction, not only for the European markets, but for the global markets. Given the stellar rally, we have seen last year, and next to none correction, the 10 -15% sell off could bring some virgin money back in the markets.
Political uncertainty in Ukraine, weak corporate earnings and especially Chinese growth are the major reasons behind this sell off. It is worse in the emerging markets, such as Turkey and Argentina . The obvious gainer of this sell off reaction was gold, which is still holding on to its last week gains.
The economic data released in the US last week has increased the odds further of tapering by the Fed, which is due this week, and this is also having an impact on investors’ appetite for riskier assets. Christine laggard, the managing director of the IMF, also echoed her concern last week and said this a downside risk for the global economy.
Back in Europe, we do have German IFO business climate number due at 09:00 GMT and the expectations are for 110.2 which is higher than the previous reading of 109.5. Mario Draghi, the ECB president, has called the recovery “Dramatic”, but at the same time, he is still maintaining his view that the recovery is uneven and fragile.
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