A wave of jitters dispersed across the global markets in the early trading session on Monday following the static China CPI of 2.3% which rekindled concerns over a slowdown in economic momentum in the world’s second-largest economy. For an extended period, data from Beijing has repeatedly followed a negative path and this could be the continuing theme as the nation continues to transition away from its manufacturing roots towards the service sector.
Despite the mounting concerns over China’s pace of growth, the Shanghai Composite Index received a welcome boost trading +1.65% higher as expectations heightened over further monetary easing by the People’s Bank of China (PBoC) in an effort to attain stability. The sentiment remains bearish for the Chinese economy and with CPI rooted around 2.3%, concerns may elevate further ahead of the China’s GDP report which will be released on Friday.
Stock Markets fluctuate
Global stocks moved erratically during trading last week following the bursts of risk aversion and violent swings in oil prices that tore global sentiment into various directions. European markets managed to claw back some losses in Friday’s session as the unexpected appreciation in oil prices offered oil and energy stocks an uplift. This bullish domino encouraged American markets to trade higher with the S&P 500 concluding +0.28% higher. While Europe and America may enjoy short term gains, Asian markets could be left depressed with an appreciating Yen due to risk aversion ensuring that Asian stocks remain capped. With uncertainty building up ahead of the major China and central bank releases this week, stock markets could be left pressured with risk aversion boosting appetite for the safe-haven Yen.
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EURUSD Spotlight
The EURUSD has bounced in a modest 100 pip range in the first trading week of April with ongoing EUR and USD weakness ensuring the pair remained in a fierce tug of war. There may be a possibility that investors are on standby as expectations heighten over the European Central Bank unleashing stimulus measures to boost Eurozone growth, while the declining optimism towards the Fed raising US rates in Q2 has faded the parity dream for the EURUSD. Dollar vulnerability may ensure that the EURUSD remains buoyed especially at a period where the instability in the global economy dictates whether the Fed will raise US rates at all in 2016. It must also be remembered that we live in a period where unorthodox central bank interventions have severely skewed the financial markets consequently producing inverse reactions to forced currency depreciations. Based on this the EURUSD may be fundamentally bullish and a bullish extension could be pending once the current technical correction comes to a halt. From a technical standpoint, prices are trading above the daily 20 SMA while the daily MACD has also crossed to the upside. With there being consistently higher highs and higher lows, bulls have ample breathing room to trade towards 1.1500 as long as the previous higher low at 1.1150 defends.
Commodity spotlight – WTI Oil
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Crude oil lurched towards $41 during trading on Monday as volatility intensified ahead of the OPEC meeting in Doha which most have anticipated could conclude without a resolution to the supply glut. Although major oil players may be commended on their ability to exploit market volatility to generate speculative boosts in oil price, the fundamentals of an unrelenting oversupply should keep prices depressed. Even if theoretically production is frozen, Iran continues to boost output into a market that is already 2mbpd already oversupplied which almost defeats the purpose. WTI remains fundamentally bearish and bears could install another round of selling momentum if market participants are left empty handed with no solution offered to the supply glut. From a technical standpoint, bears need to break back below $38 for a potential decline back to $35.
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