Having come full circle from its previous peaks 15 years ago the Nasdaq Composite was unable to sustain its gains above the 5,000 level
and subsequently slipped back, dragging the other US benchmarks with it.
In a new month, a new week and new records, profit taking appeared to be the order of the day yesterday,
as not only US markets slipped back, but so did the German DAX
and the FTSE100, as a lack of new factors pulled markets down from their highs.
This week’s record highs appear to have brought back some unpleasant memories of when the Nasdaq was last at the 5,000 level,
and on a day when we found out that US markets have been driven higher by record levels of companies buying back their own stock, it appears that investors have decided that taking some profit could well be prudent in a week that could see some disappointment from this week’s economic surveys and employment reports.
While we could well see a positive European open today,
we learned earlier this week that for all its problems Greece isn’t unique with respect to bad or high levels of debt
The banking problems in Austria look set to weigh heavily on the public finances of the Austrian government and look set to see a regional default of billions of euros, placing further strains on a beleaguered European banking sector.
That being said we have seen some silver linings in this week’s European economic data
so far and today’s services data could well add to those with improvements expected in the latest Spain, Italy, France and Germany services PMI’s for February
, with readings of 56.9, 51.4, 53.4 and 55.5 expected.
In the wake of yesterday’s blow out German retail sales numbers, we are expecting a similarly positive improvement from the broader Eurozone January retail sales numbers
as well, with a rise of 2.5% expected.
In the UK,
optimism about the resilience of the economy in Q1 continues to build after both manufacturing and construction PMI numbers beat expectations for February this week. The true test though comes with this morning’s services PMI numbers
given how reliant the UK economy is on this particular sector. Expectations are for an improvement from 57.2 to 57.5.
Concerns about a slowdown in the US continue to gnaw away
at the ability of US markets to push significantly higher in the short term, and while today’s February ADP employment report could well be a leading indicator of Friday’s payrolls report, investors are likely to be more interested in the services ISM number and the Beige Book of economic conditions, given recent patchy manufacturing data.
The ADP number is expected to see 218k new jobs added in February,
a slight increase on the 213k added in January, while the ISM non-manufacturing index is expected to see a slight decrease to 56.5 from 56.7. Of particular interest will be the prices component given how weak this week’s manufacturing prices paid component was.
Later in the day the Federal Reserve gives its regional account of economic activity
in the regions in the form of its Beige Book of economic conditions
, and any significant change of tone here could well augur badly with respect to the timing or otherwise of any potential move in Fed policy.
– so far rebounds have been confined to the 1.1250 area which was originally the range lows for most of February. A move through 1.1270 should re-target the 1.1450 area and last week’s high. The next support lies at the 1.1090 area and the January lows. A break here targets 1.0800.
– the pound continues to drift lower and could well test the 1.5280 area in the coming days if we break below the 1.5330/50 area. Last week’s key day reversal remains a concern but only a move below 1.5280 argues for a move back to 1.5000. Resistance sits at 1.5480 and behind that at 1.5570.
– the current rebound continues to stall near the 0.7300 level and this needs to break to target a move higher back towards 0.7460. The rebound off 0.7240 looks like a key day reversal but needs confirmation on a move through 0.7320. The 0.7460 level remains a key resistance on the topside and while we could get a rebound, the risk remains for further losses. If we push below 0.7240 then we could well see further losses towards 0.7000.
– another failure to hold above the 120.00 level is keeping long positions nervous, and as such we need to get above 120.60 to suggest a retest of the 121.85 highs from last year. Back below 119.70 argues for a return towards 118.60.
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