Despite starting the year on a positive note, European markets appeared to stall towards the end of last week, as more and more earnings announcements started to come out on the weaker side of estimates.
The early release of Deutsche Bank’s earnings late last night
, which showed a €1.2bn Q4 loss, could well reinforce this negative tone today, particularly in the absence of US markets today, due to Martin Luther King Day.
While economic data in Europe has started to show some embers of optimism
, it is also equally apparent that there also remain significant worrying pockets of weakness, particularly in France and Italy.
Last week French President Hollande announced some measures to try and kick start a turnaround in the French economy, though there appeared widespread scepticism that these measures would amount to more than words.
This week’s January flash PMI data, which are due for release Thursday are likely to point to continued weakness in the French economy, and further calls for additional ECB action to help stimulate the weaker parts of the European economy.
On the plus side, the weekend decision by Moody’s to upgrade Ireland’s credit rating
to “Baa3” with a positive outlook, and out of junk territory, in the wake of the recent exit from their bailout program can be construed as a positive, however the decision merely brings the agency in line with Fitch and S&P who already had Ireland on a similar rating.
Chinese data overnight
showed that even the economy there is starting to exhibit signs of tiredness with the latest GDP numbers
showing a slowdown in Q4, from Q3. Q4 GDP slowed from 7.8% to 7.7%, the lowest level for 14 years, while industrial production for December came in at 9.7%, down from 10% in November.
Retail sales also slowed slightly from 13.7% in November to 13.6%
, but it was the sharper than expected slowdown in Q4 as well as concern about China’s banking sector and higher lending rates along with a slowing property market, which is keeping investors nervous, and as such we can expect to see a slightly weaker open in Europe this morning
– Friday’s move below 1.3550 and the 100 day MA suggests we could well be on the way towards the 1.3300 area and November lows over the next few sessions, after finally failing to overcome the 1.3700 area. A concerted move below 1.3520 and the December lows could well be the catalyst for such a move.
– Friday’s sharp move higher stalled at the 1.6460 level after finding support at the 1.6300 as we look to break out of the current range between 1.6250 and 1.6550. The potential head and shoulders formation still needs confirmation, but needs a break below 1.6250 to trigger the next move. Above the 1.6520 level would negate the pattern and argue for a return towards 1.6620.
– last weeks failure to get above the 50 day MA at 0.8352 has seen a move back towards the 11 month lows at 0.8230 and keeps the prospect of a move towards the longer term objective at 0.8160/70. Any rebounds are expected to find resistance at 0.8270 and 0.8320.
– last weeks rebound has found resistance at 104.80 trend line resistance from the recent highs at 105.50. A move back below 103.70 could well signal a return to the lows last week at 102.90 on the way to a move towards 102.00. Only above 105.50 argues for a move towards 108.00.
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