Comment: European Markets Track Wall Street Losses
April 7, 2014 6:02 am
Friday’s solid US nonfarm payrolls data triggered a late selloff on Wall Street as traders viewed the reading as confirmation that the Federal Reserve will not change course on tapering of the bond-buying programme which will mean interest rates will increase this time next year. That prompted Asian markets to decline overnight with traders showing hesitancy ahead of the Bank of Japan policy meeting in which the central bank is expected to maintain current measures in place. Traders are worried that Japan’s move to raise the rate of sales tax could discourage consumption which could hurt economic growth prospects in the country. For that reason, unwillingness by the BOJ to expand its bond-buying programme is likely to be greeted with disappointment. In Asia, Chinese markets were closed for a public holiday but the Japanese Nikkei 225 fell 1.6% while South Korea’s Kospi dropped 0.4%. Over in the states on Friday, the nonfarm payrolls report for March showed the world’s largest economy generated 192k jobs with 37k revised upward for the previous month and the rate steady at 6.7%. The initial reaction to the payrolls report seemed positive with the S&P500 breaking new intra-day highs however in a battle between the bulls and the bears, it was the bears who eventually won as the overriding message from the report was the health of the US labour market is better than we anticipated which means the Fed have no reason to slowdown or halt the pace of tapering. Traders are now looking to the Fed’s meeting minutes out Wednesday for further clues over the central bank’s thinking regarding the state of the US economy at the moment. Back in Europe, price-action is being led lower by the decline in Asian and US markets with even decent German economic data being unable to cheer up investors. Industrial output from Germany expanded by more than expected in Feb., by 0.4% versus expectations of 0.3%. Out of Spain, the good news continues with the country’s industrial output data smashing the doors off, up by 2.8% on the year – above consensus and again like the PMI services and manufacturing report, suggesting the Spanish economy is staging a recovery despite the need for more structural reforms which would increase recent productivity.
Friday’s solid US nonfarm payrolls data triggered a late selloff on Wall Street as traders viewed the reading as confirmation that the Federal Reserve will not change course on tapering of the bond-buying programme which will mean interest rates will increase this time next year. That prompted Asian markets to decline overnight with traders showing hesitancy ahead of the Bank of Japan policy meeting in which the central bank is expected to maintain current measures in place.
Traders are worried that Japan’s move to raise the rate of sales tax could discourage consumption which could hurt economic growth prospects in the country. For that reason, unwillingness by the BOJ to expand its bond-buying programme is likely to be greeted with disappointment. In Asia, Chinese markets were closed for a public holiday but the Japanese Nikkei 225 fell 1.6% while South Korea’s Kospi dropped 0.4%.
Over in the states on Friday, the nonfarm payrolls report for March showed the world’s largest economy generated 192k jobs with 37k revised upward for the previous month and the rate steady at 6.7%. The initial reaction to the payrolls report seemed positive with the S&P500 breaking new intra-day highs however in a battle between the bulls and the bears, it was the bears who eventually won as the overriding message from the report was the health of the US labour market is better than we anticipated which means the Fed have no reason to slowdown or halt the pace of tapering.
Traders are now looking to the Fed’s meeting minutes out Wednesday for further clues over the central bank’s thinking regarding the state of the US economy at the moment. Back in Europe, price-action is being led lower by the decline in Asian and US markets with even decent German economic data being unable to cheer up investors. Industrial output from Germany expanded by more than expected in Feb., by 0.4% versus expectations of 0.3%.
Out of Spain, the good news continues with the country’s industrial output data smashing the doors off, up by 2.8% on the year – above consensus and again like the PMI services and manufacturing report, suggesting the Spanish economy is staging a recovery despite the need for more structural reforms which would increase recent productivity.
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