European markets and US futures are trading sharply lower today and starting on a much lower wave length where they finished off last week. If there is something which can shake consumer confidence, it is certainly the safety concerns and geological situations and after the terrible weekend events in Paris, this equation has become much more worse. The aftermath of this event with more strikes on Syria could breed more uncertainty and perhaps a lot more refugees in the future depending how the situation is dealt with. Nonetheless, it was unquestionably the last element which the traders wanted to have- given the sell off, which we experienced last week.
Normally, this is the time, when we start seeing the Santa rally in the market, but nothing like that is taking place so far this year.
The overall sentiment is extremely fragile due to the weakness in the oil price and lackluster earning season. The Fed with their consistent message of raising the interest rate is just adding additional uncertainty. It will be interesting to see the spikes in the volatility index when the markets will be trading.
But, then the question is if the consumer sentiment starts to dip even lower and the events in Paris have shaken the sentiment even more, could this be something which the Federal Reserve Bank in the US could use as an example excuse to delay the rate hike? Perhaps, no because, they do surely want to raise the interest rate as they know it is already too late for them. For many traders the question is about the approach which the Fed will take after hiking the interest rate. In real essence, that is what really matters and if they stay extremely optimistic and hawkish, that could surely push the US economy in another recession.
On the flip side, the European Central Bank will have more firepower after this shaken confidence and will be urged more to announce additional quantitative easing policies. Later this morning, we have the EU CPI data for October and the forecast is for zero. Mr Draghi will also be speaking later this morning and traders will be gauging only one element, which is how confident he is in announcing more stimulus. Finally, if the new measures announced will be aggressive enough to satisfy the thirst of markets will be another area of focus.
As for the US, we have the Empire State manufacturing index data due at 13:30 GMT and the forecast is for -5.3. The previous reading was at 3.12B.