The performance of Europe’s markets, which continue to look fairly well supported, as well as trading at multi year highs, stands in contrast to the weakness currently being seen in US markets, which appear to be struggling to push on from the levels that we saw at the turn of the year.
While European equities are getting a combined tail wind from a lower euro, a lower oil price, and the start of QE,
there now appears to be growing evidence that the economic outlook is also starting to improve as well, despite some weak spots in the form of Greece and France.
Contrast this to rising evidence of a slowing US economy, a stronger US dollar and the prospect that the Federal Reserve might raise interest rates
in the coming months, and it isn’t hard to see why US stocks suddenly start to look a little less attractive, as they closed lower for the second day in a row last night.
As we come to the end of the week the focus is set to remain on the continued shuttle negotiations between Greek government officials and EU officials
with respect to the status of the latest version of the Greek reform list. A new list was submitted yesterday, but initial soundings suggest that it remains as short on detail as the list that was put forward at the end of last week.
On a brighter note the ECB once again increased the ELA for Greek banks by another €700m
, the incremental increases keeping the pressure on to arrive at a solution, ahead of next week’s April 9th IMF payment deadline.
A great deal of scepticism remains about the prospect of any type of deal before the next EU finance ministers meeting on April 24th
, which given that Greece needs to make various payments of nearly €2.5bn, between now and then, doesn’t bode well for any sort of resolution this week, or next week, for that matter.
These concerns don’t appear to be manifesting themselves in terms of investors being cautious about buying European equities, with markets here in Europe set to open slightly higher
On the data front the UK economy remains a focal point as the General Election campaign gets into full swing.
Yesterday’s manufacturing PMI data for March showed expansion for the 24th month in a row, coming in at an eight month high of 54.4.
Today’s construction PMI data for March
is likely to be equally as positive with expectations of a reading of 59.7, the 23rd monthly expansion in a row and down slightly from February’s 60.1.
In the US,
after the disappointment of yesterday’s misses on the March ADP employment and the ISM manufacturing report
, attention will shift to this afternoon’s weekly jobless claims which showed a sharp drop last week to 282k.
Expectations are for a slight increase to 286k, but it will be tomorrow’s US employment report,
which will be of particular interest after yesterday’s ADP report dropped below 200k for the first time since January last year, coming in at 189k and well below the 225k expected.
The US labour market has been one of the main bright spots over the last 12 months
with readings above 200k every month since February last year. If tomorrow’s numbers follow the ADP numbers and drop sharply from last month’s 295k, below the 200k level, then we could well see a sharp unwind in US dollar long positions, as any remaining rate hike expectations for June get a hefty shove further out into the back end of 2015.
– this week’s break below the 1.0780/90 area has seen us trade as low as 1.0710 as we gear up for a move towards the 1.0600 area. To stabilise the euro needs to push back above the 1.0800 area and argue for a retest of 1.0900 and potentially the previous highs at 1.1050.
– a little bit of a bear trap yesterday rebounding from 1.4738, just below the 1.4750 level, but we still can’t seem to rally much beyond 1.4870, which keeps the risk of a move towards the lows at 1.4630 on the table. We need to push back above 1.4900 to argue for a return towards the 1.5000 level.
– yesterday’s move lower took us to the 0.7220 level before rebounding. Currently holding below the 0.7300 area. Last week’s bearish daily reversal keeps the pressure on the downside while below the 0 7340 level. Above 0.7400 argues for a move towards 0.7500.
– last week’s rebound from the 118.30 level needs to get back above trend line resistance at the 120.60 level to suggest a retest of the previous highs at 122.00. With the US dollar currently struggling we need to break below 119.20 to suggest a retest of the 118.30 area.
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