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China data disappoints, eurozone PMIs in focus

European equity markets had a quiet session. 

The FTSE 100 and DAX were essentially flat on the day while the FTSEMIB finished higher. The feel good factor in relation to the US and China was still doing the rounds. On Wednesday, it was reported that Chinese state owned companies had a least 500,000 tons of US soybean – its first major shipment in six months. Dealers viewed this as a sign that the frosty relationship was beginning to thaw.

The European Central Bank (ECB) kept interest rates on hold – meeting expectations The central bank has confirmed the bond buying scheme will finish this year, and that marks the end this particular form of stimulus. In a way, it shows show far the eurozone economy has come. Mario Draghi, the head of the ECB issued a statement that was little on the soft side. Mr Draghi, lowered the growth forecast and cautioned that the ‘risk is moving to the downside’. The euro came under pressure on the back of the statement.   

The session was mixed in New York last night with the Dow Jones finishing slightly in positive territory, while the S&P 500 ended the session fractionally lower.

Overnight, China announced a number of economic indicators. The fixed asset investment reading was 5.9%, and economists were expecting 5.8%. The industrial output came in at 5.4%, while dealers were expecting 5.9%. Economists were predicting an increase of 8.8% for retail sales, and it came in at 8.1%. Investors were spooked by the largely disappointing numbers, and there was a sell-off in Asian markets over night.

The firmer US dollar hurt gold as the commodity has enjoyed a strong inverse relationship with the currency recently. Gold has been has been staging a comeback since August, and if the positive move continues it might target the $1,265 region.

Theresa May is trying to get some wiggle room on the Irish backstop, and that is one of the major hurdles she must overcome in order to get her withdrawal agreement passed. Mrs May survived the confidence vote, but her current deal is still deeply unpopular. Sterling held onto much of the gain it made on Wednesday which is impressive.

At 8.15am (UK time) France will announce its flash manufacturing PMI and services PMI reports and dealers are expecting 50.7 and 54.8 respectively. Germany will reveal its flash manufacturing PMI and services PMI reports, and the consensus estimate is 52 and 53.4 respectively.

US retail sales will be reported at 1.30pm (UK time) and dealers are expecting 0.2%.

EUR/USD – has been diving lower since late September and if it holds below the 1.1510/00 region, it could pave the way for the 1.1215 area to be retested. A move to the upside could run into resistance at 1.1533 – the 100-day moving average.

GBP/USD – bullish engulfing might see a move back toward 1.3000 Another move lower might bring 1.2365 into play. 

EUR/GBP – the bearish engulfing might drive the market to the 200-day moving average at 0.8838. If the wider rally continues, it might target 0.9100.

USD/JPY – the upward trend that began in March is still intact, and if the positive move continues it might target 114.73. Support might be found at 111.39. 

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