Stock Market Trading: 11 July 2014
European indices are set to limp higher on the open but sentiment remains weak.
It's been a bad week for the bulls already but with the Eurozone crisis making an unwelcome return yesterday, traders are concerned that the bearish flood gates are starting to creak.
Renewed debt troubles in Portugal reignited concerns about the health of the European financial system.
Whilst markets have recovered considerably since the depths of the Eurozone crisis, recent economic data
has consistently painted an underwhelming picture for Europe and the dark cloud of deflation hasn't dissipated despite the ECB's desperate attempts.
Like most horror film sequels, expect the story line to follow the same plot but with slightly different locations and characters as 'Eurozone Crisis 2: Risk of Deflation' could be coming soon to a trading screen near you in summer 2014.
The contagion fears easily spilled across the Atlantic, sending US equities sharply lower as investors were in no mood to ask questions first.
This served to reinforce the latest speculation that stocks had gone up too fast and that a severe pullback was overdue, with the Dow Jones dropping 73 points to 16,914.
Stock Market Trading: 10 July 2014
European stocks are set to see plain sailing on the open this morning as the overnight FOMC minutes failed to rock any boats.
A little tweaking to the end of quantitative easing and a reiteration of the open ended timescale for monetary tightening didn't give anything new for traders to pounce on.
Similarly, the BoE is set to be equally static today, with no change on rates or asset purchases expected, so attention is already shifting towards the release of the minutes in two weeks.
Recent comments from BoE Deputy Governor Nemat Shafik have seen currency traders do their best to push up the pound
just in time for their summer holidays.
However, whilst speculation seems to have focussed solely on the possibility of rate hikes being brought forward, the economic back drop isn't tallying up quite so clearly.
Following the drop in inflation, the cooling of the Services PMI and Mark Carney's flip-flopping, it may be worth getting down to the Bureau de Change now to lock in the rates before the BoE kicks the issue of interest rate hikes into the long grass.
Alcoa's stronger than expected results provided fresh optimism about the corporate earnings season and allowed the Dow Jones to add 58 points to 16,992.
This even overshadowed warnings by the Fed that investors could become too complacent about the economic outlook as the central bank tried to dissuade excessive risk taking.
Stock Market Trading: 09 July 2014
European equities are set to open mixed on fears that a full on corrective rout could be on the cards.
Despite Alcoa kicking off earnings season to a good start and the expectations of a dovish FOMC statement this evening, the bulls still seem to be in disarray after the kicking they've taken over the last two days.
In an unusual reversal of the way markets have been interpreting news lately, the negative stories are getting all the attention, whilst bullish stories are being shrugged off.
We are still seeing concerns that US equities have gone up too fast relative to the pace of global economic growth, and this continued to push the Dow Jones lower yesterday, with the index losing 92 points to 16,931.
Nevertheless, hopes of a bright earnings season were lifted by better than expected results from Alcoa
, with the shares rising by more than 1% in late trading.
Stock Market Trading: 08 July 2014
European equities are struggling for direction as financial investors
wait for decisive event risks.
The rally seems to have paused and traders are reluctant to plough through the overhead technical resistance levels without a compelling fundamental story.
Although a few bearish stories from Christine Lagarde and Germany have been chipping away at confidence, the bulls are still holding firm on the hopes that the US earnings season will provide the required catalyst.
This week's FOMC meeting minutes are also expected to provide some bullish cues.
Despite analysts bringing forward their expectations for a US rate hike following the decent Non-Farms figure on Thursday, the minutes are expected to echo Yellen's very dovish comments at the IMF which saw US indices pop to new all time highs.
Nevertheless, investors will remain cautious until we see those minutes, and the rate hike speculation sparked a selloff in the Dow Jones yesterday, pushing the index 25 points lower to 17,027.
On top of that, the rally to all-time highs means that equity valuations are pretty stretched and, if this is not accompanied by suitable revenue growth in the upcoming earnings season, we might see a price correction.
Stock Market Trading: 07 July 2014
With a lack of new catalysts over the weekend, European stock markets are set to open flat this morning.
With the US out of action on Friday, we saw a pretty lacklustre session to end what was actually a pretty solid week of gains to kick off July.
The result was that indices
remain perched just below key levels and the question on traders' minds is whether they will break higher or crash and burn?
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By Jonathan Sudaria, 11 July 2014