European markets are trading lower this morning and broke their 8 days of rally yesterday. Traders have started to book some profit off the table as we suggested yesterday, which is perfectly normal. Mining sector today once again could see more selling pressure today as the price of oil woke up to a reality when the OPEC announcement hit the wire that their output has reached three high. No surprise at all and we have been very skeptical about the recent move in crude as Saudi Arabia is still maintaining its price war and cutting the price of oil to its Asian buyers and pumping record amount of oil to maintain its market dominance.
Over in Asia, it was all about China trade balance data which was released last night. The only lens which traders used was to find out if there is more weakness in the Chinese economy and how much the Chinese stimulus package is helping the economy. The import data was disheartening once again and the trend is still very much strong. During the past few months, the number has been under constant pressure and there are very little or no signs that the Chinese economy is consuming more. This represents nothing but weak domestic demand, which curses a big failure for all the efforts by the PBOC. The export number was better than expectations, but still once again it was the strength of the Chinese currency, which made more impact on the export data.
Back in Europe, we have the German final CPI and WPI number released this morning ahead of the German Zew data- due later this morning. The German CPI number matched the forecast and the previous reading of -0.2% and the WPI printed the -0.6%. But, the most important number will be the German ZEW and investors will be paying more attention tot this. Given the recent scandal about Volkswagen, the expectations are skewed towards a lower number. The forecast is for 6.8 while the previous reading was at 12.1. The scandal has caused a serious damage to German brands and there is a concern that the actual number could actually be even more lower.
As for the UK, we have the September inflation data due this morning, and investors will pay attention to this number as this could impact the rate hike expectations. Mr Carney was very much apprehensive about the inflation digit and this is the major mandate for the bank. We also have the core and retail price data for the UK and the forecast is for an uptick to 1.1% from a previous reading of 1.0%.