Spreadex Market Update
Deflation woes for Eurozone and surprise PBOC rate cut exacerbate negative sentiment this Monday
Coming in at -0.2% (the first deflationary reading since last September) against the 0.0% expected, and the promising 0.3% last month, this latest inflation figure almost surely guarantees action from Mario Draghi when the ECB meets next Thursday. Yet even the promise of an extra dose of stimulus couldn’t boost the Eurozone’s mood, the DAX and CAC falling 1.7% (remember the German index is also dealing with the day’s awful import prices data) and 0.7% respectively. Perhaps the day’s increased decline is because of the shock of figure; perhaps it is because it doesn’t seem that QE is having any effect, so any extra stimulus is unlikely to produce the much-needed results; perhaps it is because the market’s already negative tone has been exacerbated by a surprise rate cut from the People’s Bank of China. Regardless the ECB President has an unenviable task ahead of him in trying to satisfy the markets next week.
Things were slightly better for the FTSE, if not by much; falling by around 40 points the UK index was largely dragged down by its banking (with Barclays reporting tomorrow) and pharmaceutical sectors, the London Stock Exchange’s 5% fall (investors arguably jittery over the likelihood of the Deutsche Boerse merger being successful) making matters worse. In a rare sight the FTSE remained in the red despite a largely green morning from its commodity stocks, the miners likely pleased by the erratic attempt at stimulus from the PBOC.
Still to come is what looks like an equally dour open from the US markets, the Dow Jones facing a near 100 point fall when the bell rings on Wall Street. Post-open investors get a couple of bits of mildly important data to deal with, the Chicago PMI (expected at 52.1 against last month’s 55.6) and pending home sales (forecast at an improved 0.6%) facing the weighty task of trying to shift sentiment this afternoon.
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