Equities Mixed as Investors Turn Cautious Ahead of ECB Meeting

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

Equities Mixed as Investors Turn Cautious Ahead of ECB Meeting

September 11, 2019

Easing expectations surrounding policy stimulus decision from the ECB meeting and Chinese Data outcome out investors on cautious mood. 

Summary: Global equity market is seeing mixed activity on cues from respective local markets. In Asian market hours, Japan and Singapore markets saw positive price action while China and Australian stocks declined sharply owing to an unexpectedly steep decline in factory gate price update from China. However, the loss was contained as Chinese CPI and PPI data which the markets saw had positive readings. Easing trade war woes also helped provide some level of positive influence to market bulls.

ecb meeting
Investors wary ahead of the ECB interest rate decision meeting

In the European market, stocks opened subdued as market bulls lost ground owing to cautious investor stance. While there is some level of lingering influence from recent developments in the political scenario, caution from investors ahead of the ECB interest rate decision meeting, given the decline in expectations for policy easing tomorrow, combined with dovish French macro data caused key stocks and major benchmark indices to post a considerable level of decline. In the Forex market, rising US T.Yields helped USD rebound, which combined with cautious investor stance caused several major forex pairs to decline in Asian and European market hours. 

Precious Metals: Rare metals market saw a considerable decline with both gold and silver posting considerable declines today. As risk assets saw some level of activity and USD rebound on rising US T-Yields, rare metals which are considered as safe-haven assets are seeing sharp declines today. 

Crude oil: Crude oil is seeing positive price action in both major international benchmarks today. The positive price action continues for a second consecutive trading session this week as traders expect OPEC to extend supply and production cuts beyond 2019 during the upcoming meeting this Thursday in Abu Dhabi. 

AUD/USD: The pair is trading with dovish bias in the global market today as AUD bulls are weighed down by disappointing activity in Chinese markets and worse than expected outcome in Aussie business confidence data. Further, rebound in USD also affected the price momentum of the pair to some extent. 

On The Lookout: While China-U.S. trade talks related topic has taken a backseat as traders await further updates on the exact date of meeting between two nations, Brexit related progress in heating up. UK parliament has entered a five-week shutdown which is likely to extend till mid-October while PM Boris Johnson has lost his attempt at initiating snap elections twice in UK parliament so far. While a law has been passed which prevents UK PM Boris Johnson from moving ahead of with no-deal Brexit, he has made it clear that he is not likely to extend Brexit agreement with EU, setting the stage for hard Brexit outcome unless there is any major shift in power play in the UK.

Amidst all the political shitstorm, UK economic calendar today saw a second consecutive day of positive macro data outcome. Aside from macro data updates which are likely to provide short term trading opportunities for intra-day activities, all focus is now on upcoming OPEC meeting in Abu Dhabi and ECB interest rate decision meetings which are scheduled to occur later this week. Bond markets are seeing a spike in bond yields as bets surrounding policy easing by ECB has gone down considerably ahead of upcoming meeting while there is also an increased preference for risk assets which are also bolstering T.Yields. 

Trading Perspective: In forex markets, major global currencies are likely to see mixed activity on divided investor sentiment and rebound in the US Dollar which was influenced by upbeat US T.Yields. US stock and index futures trading in international markets saw jittery activity earlier in the day as the latest data outcome from China influenced some level of recession worries in the global market. This combined with caution from global investors ahead of key central bank meeting suggest the US market is likely to see subdued opening and activity today. On the release front, US calendar will see the release of JOLTS Job Openings data while the Canadian calendar will see release of Building permits and Housing starts data. 

EUR/USD: The pair is trading with dovish bias in the global market across the day as declining bets of policy easing from ECB in upcoming meeting and dovish French macro data outcome weighed down EURO bulls. Further, rebound in USD on account of recovery in US T.Yields also added pressure to the pair’s price momentum. Traders now await US macro data for short term profit opportunities later in the day. 

GBP/USD: The pair is trading positive today and recently scaled six-week highs as UK parliament managed to outvote PM Boris Johnson on his bid for Snap elections twice so far. Further, ousting of 21 MPs from tory party over rebellion on account of no-deal Brexit which caused Boris to weaken further also underpinned GBP. But gains were capped owing to rebound in USD on account of recovery in US T.Yields. Traders now await US macro data for short term profit opportunities later in the day. 

USD/CAD: The pair is mixed activity today. While the pair saw recovery from multi-week lows and gained considerable headway earlier in the day as USD gained momentum following recovery in US T.Yields. However, gains were capped soon and the pair fell down from intra-day highs as Canadian Loonie the commodity-linked currency gained momentum over positive crude oil price on expectations of extension in OPEC production and supply cut enforcements. Traders now await US macro data for short term profit opportunities later in the day. 

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