A look at the day ahead in European and global markets from Kevin Buckland
The markets will have plenty of impetus for an equity rally at the European open, after better-than-consensus China data added to the optimism already in place from expectations for a peak in rates at the biggest central banks.
Signs that the recent flurry of support measures from Beijing are working to stabilise the economy showed up in August retail sales and factory production data released this morning.
But China’s embattled real-estate sector continued to send worrying signals, with the latest data also showing a deepening slump in property investment, a day after Moody’s cut the sector’s outlook to negative.
That couldn’t dampen the feel-good mood, which had already been emanating from Goldilocks U.S. macro indicators: Retail sales and producer prices are suggesting a robust economy, but are not hot enough to require more Fed rate hikes.
With traders all but certain the Fed will stay on pause next week, and following the ECB’s dovish hike yesterday, the narrative is building for looser global financial conditions.
The dollar remains king, with the euro swooning in the course of a very eventful few days. That sets the stage for another pivotal week ahead, featuring policy decisions from not just the Fed, but the Bank of England and the Bank of Japan.
There will be plenty of opportunity to hear from ECB officials today, with the Eurogroup convening in Spain.
Boss Christine Lagarde is of course at the meeting, where the agenda includes updating the bloc’s finance ministers on goings-on at the central bank. The group will also discuss a replacement for outgoing ECB board member Fabio Panetta, who will take the helm at the Bank of Italy in November.
Key developments that could influence markets on Friday:
Sweden CPI (Q3)
France CPI (Aug)
Italy CPI (Aug), trade balance (Jul)
EZ trade balance (July), reserve assets (Aug)
US trade data (Aug), industrial production (Aug), U of Michigan surveys (Sep), NY Fed survey (Sep)
(Reporting by Kevin Buckland; Editing by Edmund Klamann)