Risk assets pause ahead of GDP data

Thursday, August 28, 2014

Wall street struggled to build on recent momentum after the S&P 500 passed the 2,000 milestone with trading activity during yesterday’s session swinging either side of the historic level before ending the day unchanged. A dearth of economic data and corporate earnings left investors struggling with direction and with comments from central bankers from both sides of the Atlantic at last week’s Jackson Hole summit signalling at continued easing of monetary policy markets remain in a sanguine mood. However, conditions could change quickly as significant macro risks, while on the backburner for now, could reappear  notably tensions between Russia and Ukraine and fighting between IS and Kurdish forces in Iraq.

The euro advanced from an 11 month low while bond yields around the world fell on the speculation that the ECB would buy bonds to combat disinflationary pressures. Yields on 10 year Japanese government bonds fell to a 16-month low while German 10 year yields fell for a fourth straight session yesterday, reaching 0.895% at one point as investors expected the ECB to boost stimulus measures. The euro posted intraday gains towards 1.320 yesterday before closing at 1.3193 against the dollar with activity early this morning seeing further moves higher, finding firm support around 1.3205 at the time of writing. Investors will be paying close attention to consumer sentiment data for the eurozone as well as German unemployment and inflation statistics for any reassurance that the ECB will extend easing measures at the September 4th ECB policy meeting.

Asian stock indices drifted lower during overnight trading as investors awaited fresh data. Benchmark equity indices across the region slipped lower on thin trading volumes as investors embarked on short term profit taking after the recent rally, sparked by a dovish ECB outlook.  With US Q2 GDP data due out later today as well as pending home sales and initial jobless claims investors will have plenty to look forward to in the coming session. However, trading activity may be subdued throughout the remainder of this week as investors position themselves ahead of the coming week and we start September with a busy week for economic data.

EUR recovers above 1.320 against the dollar

EUR Curncy Euro Spot Daily 28 2014 08 28 07 34 59 

Germany 10 year government bond yields drop on speculation of ECB action

GDBR10 Index Germany Generic Go 2014 08 28 07 39 21

Events for today

0855

DE

Aug

Unemployment Rate

1000

EZ

Aug

Bus. Climate & Cons. Sentiment

1330

DE

Aug

CPI & HICP

1330

US

Q2

GDP & Personal consumption

1330

US

w/e

Jobless Claims

1500

US

Jul

Pending Home Sales

1530

US

w/e

EIA Nat Gas

Topics: GDP, ECB, EUR
More from: Kash Kamal