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Europe Ahead: Scattered confidence with the slowing growth and deepening debt crisis
The market was surprised yesterday with the unexpected steep slump in German investors confidence by the most in two-and-a-half years in August according to ZEW on the worsening state of the economy with the deepening debt crisis and IFO is expected to confirm the downbeat news today.
It is clearly evident from the recent data that the recovery lost even further momentum into the third quarter as the debt crisis intensified in Europe and the debt burdened even moved across to the United States.
The euro area economy expanded a sluggish 0.2% in the second quarter and since then data have been trending south with the ECB and Trichet confirming that growth had slowed somehow.
We saw yesterday business activity slow in August as the expansion held steady at 51.1 yet the manufacturing sector ...
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European manufacturing and services stall, adding to signs of slowdown
The euro area released its advanced manufacturing and services data for the month of August, where the releases showed steadiness at the slowest pace in nearly two years, thereby raising concerns that the pace of growth could weaken in the third quarter.
Manufacturing and services showed further decline in August causing PMI composite to stall at 51.5.
In August, manufacturing contracted to 49.7 compared with July's expansion of 50.4 while services expansion eased to 51.5 from the previous of 51.6 in July, providing clues that the pace of progress is cooling down in the second quarter after a robust 0.8% expansion recorded in the first quarter.
Manufacturing and services readings were affected by the stall in the German manufacturing at 52.0 and drop in services gauges to 50.4 from 52.9. ...
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Focus on Eurozone indicators today
FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Risk appetite was somewhat subdued overnight. However as US stocks managed to finish in the positive, most Asian markets have responded accordingly. A lack of data and fresh event risk appears to have steadied markets but the release of several Eurozone indicators will put the focus back on growth in the region, which has held up relatively better than the US throughout the year but now appears increasingly at risk. Elsewhere, FX developments remain troubling for the Japanese and Swiss authorities, for despite warnings and sustained operations in money markets respectively, the yen and franc’s losses against the USD and EUR appear to have stalled as markets wait for the next step. In the current market environment it remains to be seen how ...
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Europe Ahead: Busy fundamental day from the continent with further slowing growth confirmations
The sentiment remains shaky and fears are evident with growing signs of slowdown from across global economies, especially in the euro area which will restrict the efforts to fiscal consolidation this year.
Although the week started with some signs of hope for the Fed to take action to stem the deteriorating state of economy, yet choppy trading and evident fears will be present today with the downbeat data awaited from the euro area.
With the slowing growth outlook, the expectations for debt-laden nations to meet their fiscal target is growing harder, a risk that even tainted France this month with fears that slowing growth and high debt will force the nation to lose its top credit rating.
The Spanish finance minister reiterated confidence in the nation’s ability for fiscal solidarity ...
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Bunds steady, supported by prospect of gloomy data
(Reuters) - German government bonds were steady early on Tuesday, supported by the prospect of more gloomy economic data adding to fears about growth in the euro zone's debt laden countries.
First readings of euro zone manufacturing and services activity in August are due on Tuesday with economists polled by Reuters expecting a contraction in the manufacturing sector.
The ZEW German investor sentiment indicator is also seen falling sharply as worries over the sovereign debt crisis weigh.
"We would expect downside risks will continue to dominate price action, as...we are at a stage where a recession is much more credible as an outcome than a swift pick up -- this was not true few weeks ago," RBS rate strategists said in a note.
September Bund futures were flat at 135.18 with 10-year ...
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Daily FX Market Outlook by AceTrader
Market Review - 03/09/2011 00:05 GMT
Dollar recovers after weak U.S. jobs data
Although dollar weakened broadly after release of worse-than-expected U.S. non-farm payrolls report as the gloomy data fuelled expectations of possible quantitative easing by the Federal Reserve at its next FOMC meeting later this month. The selloff in U.S. stocks triggered renewed risk-aversion activities and led to short-covering purchase of the greenback across the board in New York afternoon.
U.S. non-farm payrolls were much worse than market expectation as no new jobs were added vs street forecast of a 75k increase and July's figure was revised sharply down from 117k to 85k. Private payrolls came in at 17k vs forecast of 105k whilst the unemployment rate remained unchanged at 9.1%.
Versus the ...
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Thoughts to Begin the Forex Trading Week
A much needed quiet Monday morning allows for a rundown of the major happenings in the markets. PMI surveys from Europe and the Bernanke speech at Jackson Hole highlight the week. European politicians don't seem to be on the same page while traders are anticipating further action from Japan.
Market sentiment is currently in the dumps when a 1.50% decline in the S&P is considered a calm day. Fear of a double dip recession in the US and a dramatic slowing of growth in Europe have fueled an equity sell-off across global bourses. This morning European equities have stabilized somewhat today with the FTSE 100 up 1.59%. The ECB continues to buy the sovereign debt of Italy and Spain and has succeeded in stabilizing the falling euro zone bond market. A total of EUR 22 Mn has been purchased. ...
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Yen remains firm
FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Overnight price action was relatively subdued but risk sentiment remains broadly soft as the market prices in further economic weakness after last week’s string of worrying data out of the US. USDJPY remains the focal point as investors wonder when the MoF will instruct the BoJ to intervene as the yen tests record highs against the dollar. In what may prove to be a pivotal week for policy expectations in general, Fed Chairman Bernanke’s delivery at Jackson Hole could reveal whether the Fed is on the path towards further easing, even though inflation conditions are markedly different compared to 2011 and opposition within the FOMC is expected to be stronger. Mindful that macro forces may favour further USDJPY downside, Japanese Finance ...
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Looking for a Fire-Break
In more tranquil times, this week, would probably be written off as a non-event as the European and US holiday season peaks, but this is certainly not the case this time and the lack of liquidity could serve to heighten volatility even further. The inter-play between the financial sector and the real economy will be a key focus over the next week as the risks of a vicious cycle have certainly increased and the data will have a significant impact in determining whether the trend can be broken. Nervous stalemate looks the most likely outcome as the dollar and Euro both lack sufficient support to make a convincing break with sovereign buying support keeping the Euro afloat while the Bank of Japan and Swiss National Bank look to fend-off speculative inflows. Heavy intra-day volatility is ...
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