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European equities are set to open flat as persistent weakness continues to keep the bulls tempered. Despite US markets’ continuing to plough ever higher, that optimism is being offset by European traders instead focussing on weak domestic factors.
Yesterday’s weak manufacturing and services PMI data were another indication of how precariously balanced Europe’s economy is on the edge of recession. On Monday Draghi said that the ECB will do more but wants to assess how current tools were working. Well, they don’t seem to be having any immediate impact so traders will be on the lookout for some dovish comments from Draghi when he speaks this morning.
Positive data and better than expected earnings from retailers pushed the Dow into further highs yesterday. After taking a hit following weak cues from Europe and Asia, the equity markets were able to bounce back and finish 0.2% up on the day. A sign the economy is certainly improving, enough to raise interest rates? Only time will tell.
Little change for Euro against the dollar yesterday, however Goldman Sacks believe the Euro will fall in 2015. With the U.S economy looking strong and rates set to increase combined with euro weakness and the potential for more QE from Mario Draghi, could the markets challenge 1.15 or has this been priced in already given the recent falls?
Oil seems to be in limbo at the moment, with investors jostling for position before the OPEC meeting. Will they reduce output or won’t they? A question everyone is in anticipation for the answer.
Questions remain over gold as investors look to digest multiple underlying issues including the strong dollar, low inflation, and of course potentially imminent interest rate hikes. The Christmas period may see a rise in bullion purchasing and will look to push gold price past $1,200, a potentially important level.
Marius is a Dealer at Capital Spreads. His involvement with CFDs and spread betting started in 2008 after graduating from London Metropolitan University with a MSc in Finance. He contributes to the Daily Comment by providing a snapshot of the FX, indices and commodity markets (oil and gold).
Jonathan is a dealer at Capital Spreads. Having started his career in the city trading interest rate and bond derivatives in 2005, he then entered the spread betting and CFD industry in 2007 by joining the dealing desk at City Credit Capital. After successfully managing multiple asset risk books across the European, US and Asian time zones throughout the height of the financial crisis, he then took that experience to Capital Spreads in 2010.
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