US futures lower ahead of Fed speeches

US futures lower ahead of Fed speeches

By Craig Erlam on Jul 9, 2014 08:13:10 GMT

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  • UK data disappoints but no fears of slowdown yet
  • Slowdown continues in Germany
  • Fed speeches key on Tuesday

It’s been another tough start to the European session on Tuesday, with data from both the UK and Germany disappointing to weigh further on risk appetite.

It’s not that big a deal for the UK, which has experienced enviable levels of growth over the last year. Manufacturing and industrial production figures released earlier in the European session showed a decline in May of 1.3% and 0.7%, respectively. This is the first decline in both readings since November last year and, at this stage, is probably more a sign of slowing growth rates than a downturn.

The same can’t be said for Germany, which has seen a notable decline in a whole host of indicators recently. Even if we just take the last week, we’ve seen German data fall short of expectations in everything from PMI and IFO surveys to retail sales and unemployment reports. On many of these occasions, these figures have also shown a decline from the previous month. To make matters worse, these are not the first disappointing readings we’ve had from Germany which suggests this slowdown may not be temporary. Given that this is the engine of growth in the eurozone, it doesn’t bode well for the region as a whole if the strongest member is struggling to perform.

US futures are pointing to a similarly difficult start, which isn’t that surprising given the strength of the rally seen last week. In the absence of further positive catalysts, it’s only natural for stocks to pare some of these gains. There isn’t much in the way of major economic releases today that is likely to have a significant impact on the markets, but there are speeches from Fed members Jeffrey Lacker and Narayana Kocherlakota which have the potential to shake things up.

One of the main reasons we’re still seeing record highs being made in US indices right now is the commitment to easy monetary policy from the Fed, with rates currently seen remaining at current levels until at least the middle of next year. If we start to get a more hawkish tone from Fed members, or even direct hints at earlier rate hikes, I imagine these new records may become much more rare. Until then, its onwards and upwards.

Ahead of the opening bell, the S&P is seen 2 points lower, the Dow 18 points lower and the Nasdaq 1 point lower.

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, Google+ 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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