Equity markets are set for another volatile week after facing much drama last week on every end. Greece and the U.S. economic health with respect to hike in interest rate will dictate most of the trading action this week.
Having said that, for today, another major problem which has also occupied traders dashboard is the Chinese economic data, which is determined to make a headline on almost every Monday and most of these headlines are not the kind which makes you excited- especially, if you have your own money involved. The Chinese import and export data released today was a disaster once again. The country which is changing its structure and wants to promote consumption cannot be exactly thrilled to see these numbers. They were nothing, but a disappointment. The import fell nearly by 17.6%, a lot more than expected, the number was even much worse as compared to the last month’s reading.
This brings the question that how the country can maintain the growth target of 7.0% GDP. Does this mean that the people bank of China will have to do more i.e more loose monetary policy or does this mean that the quantitative easing pill has run out its course?! For now, the chatter is about more QE from the PBOC, which is acting like a steroid for the equity market. But, if you really want to hold the stock in a country whose fundamentals are becoming worse day by day and the equity market is soaring, then perhaps, you may want to revisit your trading strategy.
Back in Europe, it is all about Greece, both sides running the old game -blaming each other for their unreasonable thorny demands. The issue has become so boring that it is even difficult to keep up with it, but nevertheless, it is still driving the trading action. This trend will continue unless both sides, either adopt a classic strategy of kicking the can down the road or perhaps once for all find a solution for this.
As for the U.S., the Fridays non farm payroll number has dialled back up the expectations of a rate hike once again and has further strengthened the Janet Yellen’s view that the economy is standing on a firm foundation. However, the Fed cannot ignore the blow of growth downgrade. The growth forecast by the IMF and the OECD was lowered last week. Given that the second biggest economy in the world, China, is struggling for growth, the Fed has a serious task in hand if they want to run a tight monetary policy which is quite the opposite with other central bank’s policies.
Finally, Turkish election result which was announced over the weekend has weakened the power of Mr Erdogan and has taken a massive toll on Turkish Lira and on the equity market. Both are in a constant downward spiral and making a lot of noise in the FX market. The country’s 10 year bond yields have also ticked higher as investors are demanding more for their money.