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Markets Overview: 5 Things to Start Your Day

August 12th Europe Edition

Markets Overview: 5 Things to Start Your Day

Bloomberg Report

Welcome to your morning markets update, delivered every weekday before the European open.

Good morning. Markets will be looking towards potentially disappointing European economic data, Italy’s leaders are on the campaign trail and talk of pound parity is showing no signs of abating. Here’s what’s moving markets.

Germany’s Economy
A very significant week for Europe’s economy coming up, comfortably topped by German output data on Wednesday that’s expected to show a contraction in the second quarter. That could serve to increase the volume on demands from the European Central Bank for looser fiscal policy to try to tackle the slowdown, something austerity-embracing Germany has steadfastly refused to pursue. With the government confirming its balanced budget goal again, the pressure may start to increase should that output data disappoint to the downside.

Salvini on the Beach
Italy is on holiday but that’s not stopping Deputy Prime Minister Matteo Salvini from starting his campaigning on the beaches. Having pulled the plug on Italy’s coalition government last week and called for a swift election, Salvini is now pushing voters to give him the powers he wants to do what he first promised while his rivals plot to stop him. He’s denied that he ever wanted to pull Italy out of the euro and but for the investment community, a new campaign is reminding folks of the economic growth concerns Italy is contending with.

Pound Parity
The growing risk that the U.K. will ultimately leave the European Union without a deal has meant the notion of the pound falling to parity with the dollar is becoming a more realistic conversation topic by the day. Prime Minister Boris Johnson, in his role for less than three weeks, is now facing accusations that rather than making concrete steps to prepare the economy for a possible no-deal outcome, he’s instead focused on spending pledges averaging about 2 billion pounds a week at the current rate. All as questions remain about whether the country is headed for another election.

Talk of Recession
Important Chinese economic data is also coming up this week, with industrial production due on Wednesday, and policymakers in the country are holding off on deploying their biggest monetary stimulus weapons in order to ensure they have enough in store should the trade standoff turn into a currency war. Back in the U.S., the unprecedented strength of the dollar is causing some concerns, with some worrying that it may even trigger a recession, a word invoked too by Goldman Sachs Group Inc. after it trimmed its growth projections for the American economy.

Coming Up…
It’s a mixed session in Asia, where a few markets are closed for holidays, with the yen higher amid the trade war worries. Iron ore is continuing to sink, hitting the lowest level since late March in Singapore. Oil is down too on trade-related concerns. In an otherwise very sleepy market for new stock listings, there’s a possibility the most anticipated one to not yet fully emerged, flexible office space giant WeWork Cos. Inc., may publish its prospectus. It’ll join a 2019 cohort that appears to have disappointed plenty of people this earnings season.

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Ercu Kartas

Treasury Department Dealer Technical Analyst FX Trader

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