US futures are picking up the positive momentum from the European markets. Investors are less worried about the slow down in China and global growth. There are clear signs of improvement in China trade and lending data. This is despite the fact that we have a number of warnings from the IMF in relation to the global growth slow down. On Wednesday, we are going to see a more precise image, the Chinese GDP number along with industrial and retail sales data will hit the tape.
Nonetheless, Asian stock markets are sitting at fresh six months high and we are facing similar situation over in Europe as well. The CAC 40 index is leading the gains, up 16 percent Year To Date. The Dax index scored 13.65 percent YTD despite the fact that the economic data isn’t that robust.
It seems like bullish sentiment has decent grip for now and everyone is focused on the year to date performance of the equity markets. The fact that the ECB is looking to loosen the monetary policy even further makes the European markets more attractive for investors. As a result of this, the bond yields are sliding over in Europe making the fixed income market less attractive.
The S&P 500 index closed solid on Friday, thanks to the robust start of the earnings season. The index is nearly one percent away from its all-time high. If the earning momentum continues at this pace during this week (Wall Street giants Goldman Sachs, and Citi bank announce their earnings) the index can easily close this distance without any hesitation.
Meanwhile, the independence of the central bank remains a significant area of debate for many investors. President Trump took another swing at the Fed by blaming them not achieving the higher GDP growth. The importance of Central Banks independence was also emphasized by the president of the European Central Bank. He pretty much criticized Donald Trump for meddling with the independence of the Federal Reserve.
In commodity space, WTI and Brent are up 36 percent and 30 percent YTD respectively, have started the weak on the back foot. Investors have decided to shave some profit. A sensible choice, especially when we have seen six consecutive weeks of gains. The U.S. oil-rig activity has increased and this may continue to impact the supply side of the equation.
As for currencies, the most exciting event is going to take place over in Australia. The Reserve Bank of Australia needs to make a decision with respect to its monetary policy. It is highly expected that the bank will not change its stance and leave the monetary policy unchanged. However, the overall weakness in the economic numbers is something which needs to be acknowledged by the bank. Having said this, the policymakers are also mindful of the higher odds of a new government taking in charge, and the fiscal policy would be the key ingredient. The bank would need to factor that carefully before they decide to give any new message. For now, the only thing that investors would like to hear from the bank is that it has an accommodative attitude