PlusMarkets Analysis • September 13, 2021
European stock markets are expected to open in a subdued fashion Monday, with investors looking for direction following the European Central Bank’s policy decision and ahead of key inflation data.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.3% higher, the FTSE 100 futures contract in the U.K. rose 0.2%, but CAC 40 futures in France dropped 0.2%.
The ECB decided last week to slow down its emergency bond purchases in the fourth quarter, citing higher inflation and stronger gross domestic growth within the region.
ECB President Christine Lagarde was eager to stress that the move wasn’t the start of tapering, but investors will focus on comments from the Chief Economist Philip Lane, in particular, this week for more insights into the thinking at the central bank.
The timing of when central banks choose to scale back economic stimulus is a key driver of market sentiment, and with this in mind the latest inflation releases from the U.K. and the U.S. on Tuesday will be studied carefully.
Ahead of that, the handover from Asia was generally negative Monday, with Chinese electric vehicle stocks hit hard after the country’s industry minister said consolidation in the sector was needed.
Gold was down on Monday morning in Asia as the dollar continued to strengthen. Investors now look to U.S. data for further clues on the U.S. Federal Reserve’s timetable to begin asset tapering.
Gold futures inched down 0.10% to $1,790.35 by 12:39 PM ET (4:39 AM GMT), having recorded a weekly decline of 2.1%. The dollar, which moves inversely to gold, inched up on Monday.
Investors await U.S. consumer price index data due on Tuesday, after Friday’s data showed that the producer price index (PPI) for August grew 0.7% month-on-month and 8.3% year-on-year. The core PPI grew 0.6% and 6.7% month-on-month and year-on-year respectively.
Cleveland Fed President Loretta Mester said on Friday that she would still like the central bank to begin tapering asset purchases in 2021. Mester is one of a growing number of Fed officials who support beginning asset tapering sooner rather than later despite a weaker-than-expected August U.S. jobs report.
In Asia Pacific, China will release industrial production and fixed asset investment data on Wednesday.
The dollar began a busy data week on a firm footing, with immediate focus turning to U.S. inflation figures but investors are also wary of the Federal Reserve priming to exit from its super-supportive policy stance even as COVID-19 cases surge.
The greenback inched higher in Asia after logging its best week in three on Friday, benefiting both from safety flows and the policy outlook lifting U.S. Treasury yields.
Moves were modest but the euro fell back under $1.18 to $1.1792. The dollar also made small gains on the Australian and New Zealand dollars and marginal rises against the yen and sterling — last buying 109.96 yen.
“A couple of dynamics favour the dollar,” said Rodrigo Catril, senior currency strategist at National Australia Bank (OTC:NABZY) in Sydney, noting growing risk aversion as even highly vaccinated countries such as Singapore and Britain log surges in COVID-19 cases.
“Re-opening still faces challenges from the consumer, who is cautious and from bottlenecks which restrict ability for the economy to rebound with some gusto,” he said.
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