European markets are trading lower on the back of the sharp sell off which we experienced in the US last night. Investors are finding it difficult to assess the health of the U.S. economy given that the recent raft of economic data has been very disappointing. Perhaps traders are over worried and have a wrong state of mind by thinking that the Fed will increase the rate no matter how the economy is performing. It is very important to remember that any rate hike is data dependent and if we do see a consistent pattern for this, rate hike is completely out of question. Infact another pipe line for QE could be established. Therefore, we do not support the view that the Fed will increase the rate no matter what the economy is and want to remind our investors that the rate hike is only data dependent.
This week’s upcoming US GDP revision data may confirm that the US economy perhaps is not in that much of a good shape as it was previously perceived, but that is perfectly understandable, and this could push the rate hike expectations further. As a result, we could see some more weakness for the U.S. dollar and some strength for the equity market.
Back in Europe, the focus is once again towards Greece which is running out of options very rapidly to keep its daily operations floating. The country is highly likely to run out of cash when another big payment is due for the IMF on the 9th of April. The European Central Bank is closing all the back doors for Greece to make sure they do submit a reform package which does make more credible sense by next week and in return the country will be given further payment. Although, what plans the game theory expert, the finance minister of the country, has under his sleeves, no one knows about it, but surely he is running out of option under the current circumstances.
Investors are anxious once again about the financial system of the country and are withdrawing their funds from their banks and the process may very well continue unless either we see some resolution to reform problems or perhaps the government could take some more aggressive steps and could implement capital control in the country. Nevertheless, this all translates more uncertainty for the Greek market and this is weighing on its equity market.
Back in the Middle East, the geopolitical unrest have taken another depressing turn and Saudi’s have involved themselves by bombarding on Yemen. This clearly represents a threat to Saudi oil production which could be impacted if situation gets out of control and hence we have an upward move for crude oil today.