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November 23, 2015 - Financial Markets Update
Commodity Sell Off Under Focus and European Markets Eye PMI Data By AvaTrade
Trading the News Profitably
Asian markets have failed to provide a clear and precise lead for the European markets. Traders are lacking direction in today’s trading session. However, what can pave the way for the trading session is the economic data, which is on the docket. Investors will be laser focused towards the upcoming PMI data.
The question which you may want to ask is that why this economic data is so important- since the president of the European bank, Mario Draghi is already on track to unleash another round of quantitative easing package. The current stimulus program has failed to deliver the objectives in hand. Well, what is significant to understand is that the ferociousness of the stimulus package is very much dependent on the economic reading. The more shabby the readings are, more firepower the ECB will use in their cannons.
The PMI data which is due today will paint two different kinds of pictures for the ECB. Firstly, it is about the services part of the equation which is supported by the consumer sector so far. Lower energy prices, which are largely blamed for lower inflation are just a few of the elements which enabled consumers to keep the safety net for the PMI services data. But, it is imperative to not neglect the wage growth, which is extremely weak and unemployment is still way to high in the Eurozone. Sadly, there is no quick fix formula either and hence it raises the question that how long the consumer sector can support the PMI services sector.
On the other hand, we have the PMI manufacturing data and this number is primarily demand on external export demand – emerging markets slow down is the primary factor which is providing no aid for this number. Weakness continues in the emerging markets and there is still a lot sign that the growth me be picking up in the near future. Hence we expect this element to show more weakness when the PMI manufacturing will hit the tape. Being the president of the European bank, it is not in your mandate or responsibility about the growth in the emerging markets should stay anchored towards the upside. Nonetheless, it is the responsibility of the European Central Bank to offset any weakness with appropriate policies and battle any upcoming headwinds without any hesitations.
The commodity slump continues for this week and copper is under tremendous selling pressure along with nickel. This will create immense pressure towards the downside for the mining sector. Nickel is particularly weak today as it has dropped nearly 4.5%. Unfortunately, with China hard landing, it is difficult to see any kind of demand picking up- in fact, it is collapsing even more and there is a little for any upside move.
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