ETX Capital Daily Market Bite, 29th May, 2013: European Markets Decline Sharply; German Data Weak
May 29, 2013 12:10 pm
May 29th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European share markets have kicked off the session modestly lower, weighed by weakness in the US session overnight as investors interpreted solid US macro economic data [housing and consumer confidence] as a strengthening case for the Federal Reserve to start tapering stimulus in the near future. The Fed however will still need to see a sustainable pick-up in the labour market before reducing asset purchases so markets are likely to be volatile for some weeks until we have further clarity on the health of the jobs market. Traders will also be eyeing the next FOMC meeting minutes for further direction.
Closer to home, worries about stalling growth in the German labour market after unemployment in the region’s power house rose by 21k in May from 6k the month prior. Although the unemployment rate stayed flat at 6.9%, the headline reading was much worse than the 5k increase that markets had expected. The report has fuelled worries about a global slowdown — the IMF overnight warned on China’s outlook, lowering expectations of growth for the world’s second largest economy.
This lead to a slump in the Aussie dollar to its lowest level in nearly 20 months — Australia’s growth is highly exposed to that of China’s. Over in South Africa, the ZAR fell to a fresh 4-year low against the US dollar for the second consecutive session today on the global slowdown fears [notably IMF’s warning on China] together with domestic growth stalling as revealed in yesterday’s damp GDP figures.
Weakness in Gold prices together with ongoing tensions in the South African labour market add further pressure on the country’s growth prospects in 2013 — it’s likely that rating agencies will look to downgrade South Africa’s credit rating if lawmakers there fail to address issues such as the flare-ups in the labour market. Looking ahead, investors will be eyeing UK CBI industrial trades, US mortgage applications and US Redbook retail sales.
May 29th 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European share markets have kicked off the session modestly lower, weighed by weakness in the US session overnight as investors interpreted solid US macro economic data [housing and consumer confidence] as a strengthening case for the Federal Reserve to start tapering stimulus in the near future. The Fed however will still need to see a sustainable pick-up in the labour market before reducing asset purchases so markets are likely to be volatile for some weeks until we have further clarity on the health of the jobs market. Traders will also be eyeing the next FOMC meeting minutes for further direction.
Closer to home, worries about stalling growth in the German labour market after unemployment in the region’s power house rose by 21k in May from 6k the month prior. Although the unemployment rate stayed flat at 6.9%, the headline reading was much worse than the 5k increase that markets had expected. The report has fuelled worries about a global slowdown — the IMF overnight warned on China’s outlook, lowering expectations of growth for the world’s second largest economy.
This lead to a slump in the Aussie dollar to its lowest level in nearly 20 months — Australia’s growth is highly exposed to that of China’s. Over in South Africa, the ZAR fell to a fresh 4-year low against the US dollar for the second consecutive session today on the global slowdown fears [notably IMF’s warning on China] together with domestic growth stalling as revealed in yesterday’s damp GDP figures.
Weakness in Gold prices together with ongoing tensions in the South African labour market add further pressure on the country’s growth prospects in 2013 — it’s likely that rating agencies will look to downgrade South Africa’s credit rating if lawmakers there fail to address issues such as the flare-ups in the labour market. Looking ahead, investors will be eyeing UK CBI industrial trades, US mortgage applications and US Redbook retail sales.
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