Despite the drip, drip, drip effect of negative US economic data US markets continue to remain fairly resilient, with only a fairly nominal negative finish last night, though the S&P500 does appear to be struggling for now to maintain a foothold above the 1,850 level.
A dip in US consumer confidence
and some disappointing housing data appeared to have tempered some of the exuberance seen so far this week.
This looks likely to translate into European markets this morning with a mixed open
, following on from yesterday’s weaker performance with the FTSE
100 in particular going into sharp reverse after the strong gains on Monday, on nagging concerns that Chinese banks might be starting to pull back lending to the property sector, where there are a significant worries about frothiness.
The UK economy is once again in focus this morning
after yesterday’s upgrade from the EU commission of its 2014 growth forecasts to 2.5%, a 0.3% upward adjustment on November’s 2.2% estimate. Given yesterday’s extremely positive CBI retail sales numbers, which appeared to indicate very little negative impact from the severe weather and a sharp jump in mortgage approvals in January and the general impression is that 2014 is starting out in the same way 2013 ended.
The second iteration of UK Q4 GDP
is due out this morning and we aren’t expecting any negative surprises here and in fact could well see a positive one, with the outside chance of an upward adjustment to 0.8% from 0.7%, after the extremely positive December retail sales numbers.
More important for the markets though is some indication that businesses are starting to feel more confident about the economic outlook
and feel more confident about boosting investment and capital expenditure. Ideally we would like to see an improvement on business investment
, however expectations are for a slight decline from the previous 2% to 1.3%.
Private consumption figures could well see a move higher as well, though we might have to wait for the final adjustment to the GDP numbers in one month’s time.
The weaker tone for US data looks set to continue this afternoon
with the latest new home sales data expected to a 3.4% decline in January, following on from the 7% decline seen in December. In fact there is a serious concern that the US housing market could well remain weak for some time to come
if the recent announcement by US bank JPMorgan Chase is any guide.
Its announcement this week that it is set to cut even more jobs in its mortgage business doesn’t bode well for a sector that has helped drive the US recovery over the last 12 months, and could well raise concerns that the recent slowdown in US economic data could be down to other factors than the unseasonably cold weather.
– another day and another range trade day, struggling to move much beyond recent highs, with the key resistance still at 1.3840, long term trend line resistance from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. The euro bias still remains negative while we remain below 1.3840 but the lack of any dip does raise the concern we could push higher.
– continues to range trade with some selling interest above 1.6710 and bids in the low 1.6600’s. The failure at 1.6820 last week keeps the risk for a fall back towards 1.6510/20, particularly if GDP data disappoints later this week. The bias remains for further gains but we could well see a correction first.
– the current rebound appears to be finding resistance near the 0.8270/80 area. While we remain below the long term trend line resistance above 0.8330, the bias remains for a retest of the 0.8160/70 area. A drop below 0.8160 targets a move towards the 2010 lows and 0.8065.
– the US dollar continues to find selling interest anywhere near the 102.80 level with a move above the 103.00 area required for a move back higher. This suggests that the risk remains for a drift lower towards the 200 day MA at 100.20. Last weeks low at 101.40 keeps the pressure on the downside with the first support at the twin lows at 100.80. To stabilise we need to see a move back above the 103.00 level, and the highs this month to argue for a return to the 105.50 area.
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