K Retail Sales may disappoint again
German Banking industry an interesting area
Global Stock market rout ease off
Merkel faces first post-election test
Fed wants to review inflation target
Markets
European stock market and US futures looked set to stem their losses. Today’s European car sales data has shown growth reviving and this has set a positive tone for investors. Concerns about outsized gains in the stock market, overstretched valuation and the sell-off in the commodity space made investors shave some profit off the table in the last few days. However, bargain hunters have stepped back in and as a result, the oil price has moved higher. Traders are no longer paying much attention to the stockpiles or inventory story anymore.
Currencies
The UK retail sales data will deliver further information about consumer spending. Yesterday’s wage and unemployment numbers were lacklustre and the wage growth number clearly showed how inflation is outpacing the wage growth. The number of people employed also dropped by 14K and this raised many eyebrows amid investors. Brexit and employment market go hand in hand and it appears that the employment market is ready to show the effects of Brexit uncertainty. The silver lining is that one particular number would not necessarily sets the trend, we need to have more a few reading before we say that the train off the track.
We expect the retail sales number to be underwhelming and the weaker trend could very well continue. The forecast is for 0.1%. The weak retail sales number could change in the coming months because we are approaching close to Black Friday and holiday period.
As for the Euro, the currency shows the ratio of aggregate puts to call options is still increasing while the recent CFTC number shows the net longs at a level not seen since 2011. The currency is simply on the rollercoaster against the dollar and Sterling. The strong German economic numbers released this week provided strong wind but it appears some stronger catalyst is needed for the currency to pick up its steam again.
Commodities
The gold price has been trading in a tight range and we need to break out of the recent consolidation zone which ranges from 1270 to 1290. The firm US data bolstered the prospects of another rate hike this year and this has made traders a little cautious in taking any major long positions. As long as the unemployment keeps falling and the US sustains its growth level, it is likely that the Fed would not only hike the interest rate this year but the process would continue into 2018 as well. This would strengthen the dollar index which could take the further shine off the metal.
Stock
The German banking industry remains the area of interest especially after the recent developments about Deutsche Bank. Althgouh consolidation in the German banking sector could be the theme for the next year, but we do think Cerberus capital management’s 3% stake in Deutsche Bank is more of a value play. The fund may be looking to make money on the bank’s higher share price.
