MARKETS
08:45 A.M

ETX Capital calls the FTSE 100 to open up 13 points, the DAX up 18 points and the CAC-40 up 4 points.

Regional markets are set to open a little higher Monday, despite a negative session in Asia overnight with market participants looking to a Eurogroup meeting in Brussels later today for further direction. EU finance ministers are to discuss measures announced at the EU summit last month, while ECB head Mario Draghi will address the European Parliament’s economic and monetary committee.

Data overnight from China is likely to add pressure on prices, with CPI coming in worse than expectations. The European data menu is rather light, with German trade balance the major highlight. UK bank Barclays remains under the spotlight, with weekend press suggesting directors at the bank are said to consider splitting the group in two, listing the investment bank in New York.

Ishaq Siddiqi - Market Strategist - ETX Capital - www.etxcapital.com

09:00 A.M

Market are trading little changed this morning in the aftermath of Friday’s disappointing job data. Overnight we had inflation data out of China which came in once again lower than expected, hitting the lowest level in almost 2 ½ years and certainly giving China room to implement additional growth stimulus measures. Although any new measures might not be imminent as China only lowered interest rates last week and might want to wait for further economic data before making any final decision on potential stimulus. With the economic data schedule on the light side today traders are once again expected to focus on rising periphery yields which could easily pressure equity markets again today and ECB chief Draghi’s appearance in front of the European parliament. Furthermore traders will keep a close eye on the meeting of EU finance ministers in Brussels today, basically a follow-up to the last EU summit just over two weeks ago with not necessary many new developments expected. Overall for the start of the new trading week volume is expected moderate at best, with equity markets remaining vulnerable to further sell-offs in light of the dire economic situation in Europe with no major improvement likely in the near future.

Of heightened interest will be BOE deputy governor Tucker’s testimony on the Libor scandal, expected to shed light in the matter regarding if and what his involvement has been with some even speculating that further revelations might prevent him from being named as successor to BOE chief King. Finally Alcoa will be kicking-off the earnings season after the US close today, main focus will be on the outlook for the coming quarter with slowing growth in China and Europe expected to continue to take a heavy toll.

Markus Huber - Head of German HNW Trading - ETX Capital - www.etxcapital.com

12.30 PM

Regional markets are softer Monday, with clients reluctant to build positions ahead of the Eurogroup meeting expected later in the day. Markets however have trimmed session losses since the start of the session, helped by German economic data, which shows goods exports surprisingly shooting up 2.9% in May, indicating the country’s exports are still robust and GDP could grow in 2Q.

Also helping the mood, the EC said that direct recapitalization of euro zone banks which were announced at the EU summit last month will not require sovereign guarantees as soon as the bloc has established a new banking supervisory body, offering some clarity over the EU’s stance on this matter. These remarks by the EC have helped kick the euro higher against the dollar in mid-day European trade.

Last week, senior EU policymakers said that Europe won’t obtain powers to recapitalize banks directly, causing discomfort to markets. But despite the EC’s comments today, scepticism remains over today’s EU finance misters meeting due to divergences within the Eurogroup, particularly over the implementations of the bank recapitalization measures.

Clients are worried that today’s meeting will further highlight divisions between policymakers, exposing a lack of unity in the EU. As such, further delays and divergences over the launch of the ESM by policymakers appears to be the driver behind today’s hesitance by markets to increase appetite for risk. Furthermore, worries about Spain continue to rumble in the back, providing more of an excuse to book profits.

Yields on the Spain’s 10-year bonds flirting with the dangerous 7% mark. Earlier, headlines suggesting the EU’s council draft states that Spain’s budget position has deteriorated substantially in recent months and the country must take further fiscal measures if risks to budget plans materialize. Spain’s IBEX-35 has been kicked lower as a result, down 1.5%.

Looking ahead, the US macro data plate is rather light with only consumer credit worth being noted. The attention will be on 2Q earnings from Alcoa – historically, the steelmaker kicks off the reporting season in the US and sets to tone for the week ahead after the release, so any disappointment in earnings will knock sentiment further and indicate that US corporates are suffering. ETX Capital currently sees the DJIA opening down 46 points and the S&P 500 opening down 5 points.

Ishaq Siddiqi - Market Strategist - ETX Capital - www.etxcapital.com

6.00 PM

Financial markets were again under pressure Monday, extending Friday’s losses. Peripheral European bond yields were on the rise with Spain's 10-year back above dangerous 7% level during the session. On Wall Street, markets declined on downbeat rumblings out of Europe, with the attention turning on aluminium giant Alcoa, kicking off the 2Q’12 earnings season with numbers which are due after the US closing bell.

European stocks dropped sharply toward the end of the session following headlines out of ECB President Mario Draghi's testimony to the European Parliament's Economic and Monetary Affairs Committee.

Despite saying that the central bank stands ready to do "everything needed" to ensure price stability in the euro zone, Draghi said 2Q indicators point to weakening growth and heightened uncertainty in the EMU.

What really worried the markets was his comment on the ESM not being ready to recapitalise banks by the end of the year, but “we are going as fast as we can. We want to do things right.” Rattling the market further, ECB chief economist Peter Praet said two years of European sovereign debt turmoil have made the current situation "more profound and more fundamental" than the events which toppled Lehman Brothers in 2008.

As such, scepticism grows over the outcome of today’s EU finance ministers meeting in Brussels, where leaders will try to flesh out plans to reinforce the single currency. Markets are worried the discussions will yield little and instead highlight divisions between leaders. Implementation of direct bank recapitalisation and whether bailout funds will be used to purchase bonds in the secondary market will dominate the talks.

Tomorrow’s economic menu sees UK and France both print industrial production readings for May. The UK will also report manufacturing production and trade balance data. Also in focus, Germany’s constitutional court begins its examination of the legality of the ESM and fiscal pact in a fast-track process.

Ishaq Siddiqi - Market Strategist - ETX Capital - www.etxcapital.com

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