Daily market commentary: Share markets extend their bearish pull-back in Europe, alongside Asian stocks, and US futures

Forex

The Japanese yen is trading flat in relation to the US dollar during early Tuesday, remaining close to the eight month-high touched during the previous session. There has been a crescendo in expectations that the Bank of Japan will move towards ending the ultra-accommodative monetary policy of the last few years, with a further relaxation of its yield curve control seen as a clear confirmation of such intentions. Amidst this climate, tomorrow’s BoJ meeting is seen as a focal point for traders, with many believing that the central bank may announce changes to its yield curve control policy. The markets have been pressuring the limit of 0.5% set for the yields of the 10-year bond, forcing the BoJ to maintain a very considerable purchase programme. Should the BoJ confirm expectations and announce a further relaxation of its yield curve control policy, then there will be scope for further yen gains.

Ricardo Evangelista – Senior Analyst, ActivTrades

Daily Market Commentary

European Shares

Share markets extended their bearish pull-back in Europe on Tuesday, alongside Asian stocks, and US futures, as the slight “risk-off” trading stance continues. Market sentiment remains mixed this week as investors continue to take some profit, and await further bullish catalysts after the recent reassuring macro developments. The current slide, led by tech and consumer cyclicals shares, remains limited so far and most indices still trade above their first available support level.

In addition to the “take-profit” moves, investors may want to remain careful ahead of the highly awaited earning season, expected to be much less encouraging than the previous ones, as traders estimate Q4 reports to be significantly dented by the current monetary tightening. All eyes will be on the banking sector today as investors wait for Q4 earnings from Morgan Stanley, Goldman Sachs and Citizens Financial Group Inc. Of course, better earnings than expected could significantly boost market sentiment, increase risk appetite, and drive stock markets much higher. Furthermore, traders will also pay close attention to speeches from central bankers, including officials from the Fed, the ECB, the BoJ as well as the IMF at the World Economic Forum in Davos in order to get more clues on where the global economy is heading.

Pierre Veyret– Technical analyst, ActivTrades 


Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

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