By Naeem Aslam
US and European futures are lower on Monday as traders embrace big economic data, while also digesting the economic data out of China over the weekend.
The Chinese Manufacturing PMI dropped to its lowest level in six months, causing concern among investors and traders. These economic numbers, coming from the second-largest economy in the world, could potentially cause trouble for the global economy.
Asian Session
Most stock indices in Asia closed mixed on the first trading day of the week as investors remained largely concerned about the Chinese Manufacturing PMI, which printed 49.1 against the forecast of 49.4. The data’s confirmation of the fastest contraction for this sector since July dented sentiment among traders and investors.
A number that continues to show a reading below 50 confirms contraction for the sector, and any number above the 50 mark confirms that the economy is expanding. Not all is bleak in the Chinese economic data, as the non-manufacturing PMI number indicates growth, registering a reading of 50.3, an improvement over the previous reading of 50.2.
European Markets
European markets are trading lower as investors favour the narrative of taking some chips off the table after the decent rally we saw in European indices last week.
The fundamentals continue to support the sentiment that inflation is very much under control, and the current actions taken by the European Central Bank very much warrant them to continue the process of cutting interest rates.
Following the latest inflation data, traders now hold the belief that the ECB is likely to initiate another rate cut, although the exact timing remains uncertain. However, there is solace in the fact that the ECB is reducing interest rates, signalling the end of the period of higher rates.
Rightmove, which is based in the UK, is highly interesting in terms of stocks. The company has done very well over the past few years and continues to remain the only main leader in terms of listing for rents and sales.
The fact that the Bank of England has started the process of cutting rates in the UK means that the housing market may actually see some life coming back to it. And now, the big question is how big the future will be for Rightmove after its rival REA Group showed interest in the platform.
US Markets
US stock futures are trading higher as investors continue to celebrate that fear of hard landings has faded and good days are ahead for the US stock market and its economy, as the Fed will begin the process of cutting interest rates very soon.
The S&P 500 has posted four straight months of gains, and the fact that the index has moved higher and continues to maintain its momentum shows that it is not only one sector, such as tech, that is driving the markets higher, but in fact the move is much more broad-based, and things are improving across the board.
Going into September, traders and investors are feeling a lot more comfortable about this month, as the best thing to look forward to is when the Fed will cut the interest rates.
However, most market participants continue to believe that the Fed will cut rates by 25 basis points, but one should not rule out the possibility of much deeper rate cuts if US labour data shows significant weakness.
As for the Nasdaq 100 index, it also continues to show much more improvement and strength and the important levels are shown below.
On the one-hour time frame, the price seems to have formed a symmetrical triangle pattern which show that prices’ trading range has narrowed and likely to experience a period of higher volatility.
Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.
