European data in focus as chaotic week draws to a close

Today’s UK opening call provides an update on:

  • German consumer confidence seen remaining at six year highs;
  • UK third quarter growth expected to be confirmed at 0.8%;
  • US annualised third quarter growth expected to remain unchanged at 3.6%;
  • Beware of triple witching today..

With the big “will they or won’t they” FOMC meeting now behind us, markets are expected to be much quieter in the lead up to Christmas, with trading volumes significantly reduced and the economic calendar looking very thin.

There’s still a few economic announcements today worth keeping an eye on, although a couple of them are final revisions to previous releases which tends to reduce the impact they have on the markets. First up is the German Gfk consumer confidence survey, which is expected to remain at six year highs of 7.4.

Big efforts are currently being made in Germany to increase consumer spending, in the hope that it will lead to the country importing more goods from other eurozone countries and aid in their recoveries. One example of this will be the increase in the minimum wage, which will both help other countries become more competitive with Germany while also giving Germans more cash to spend, hopefully on imported goods from Greece or Spain etc.

This rising consumer confidence that we’re seeing is hopefully a sign that these efforts are working and the rebalancing of the eurozone is finally underway. Going forward we will hopefully see this reflected more in trade balance figures, with Germany’s trade surplus, which is currently at record highs, falling which will hopefully then bring down the trade deficits of other eurozone members.

The final revision for UK GDP is expected to confirm that the country grew by 0.8% in the third quarter, leaving it on course to record the strongest growth of any of the major Western economies this year. This is quite unbelievable when you consider that it was only this year that the country was in crisis and at risk of falling into a triple dip recession.

Not only did that never materialise, but the double dip has now been revised away and people are more focused on when the Bank of England will raise interest rates, rather than what it will do to stop another downturn. If this momentum can be carried into 2014, it could be a very good year for the UK.

Next up we have the final revision of the US third quarter GDP figure. On an annualised basis, this is expected to remain at 3.6% following the upward revision a couple of weeks ago, that undoubtedly contributed to the FOMC’s decision on Wednesday to reduce its asset buying program by $10 billion. In fact, Fed Chairman Ben Bernanke highlighted this, alongside improvements in the labour market as one of the reasons for the taper.

Finally, we have the preliminary reading of the eurozone consumer confidence figure for December. This is expected to remain deep in contraction territory at -15.4, highlighting the huge pessimism among consumers in the eurozone still. That said, we are still seeing gradual improvements here in the long term which is still a positive development. The eurozone crisis is still got a long way to go and the recovery is going to be very gradual, so this data is actually very consistent with expectations.

One more thing worth noting is that today is one of the four occasions in the year when we have a triple witching. What this means is that contracts for stock index futures, stock index options and stock options all expire today. This can create a surge in volatility, particularly towards the end of the day.

Ahead of the open we expect to see the FTSE up 22 points, the CAC up 21 points and the DAX up 34 points.

About Craig Erlam

Craig Erlam is Market Analyst at Alpari UK. He joined Alpari (UK) at the beginning of 2012 after four years in the financial services industry, including working at Goldman Sachs. Craig writes market commentary that regularly appears on websites including The Financial Times, Reuters, BBC, The Telegraph and FOX Business. He also provides insight and analysis for clients which he posts daily on Twitter and the Alpari (UK) website. You can also find Craig on YouTube where he gives short market updates, including charting analysis.

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