08:45 A.M

ETX Capital calls FTSE +20 points, DAX +9 and the CAC-40 +4

European stocks are to open marginally higher, extending Friday’s impressive rally inspired by measures announced by EU leaders. Latest measures have provided riskier assets like stocks and the euro support, while Spanish and Italian bond yields have moved of dangerous highs. The question now is how sustainable is the rally sparked by the latest development in the euro debt crisis story? With ECB and BOE policy decisions and US nonfarm payrolls data this week, recent gains may soon be under threat. Today’s focus will be global manufacturing data, with indicators from Japan and China out overnight both beating forecasts. The attention is now on UK, Euro-zone and US manufacturing releases. Weakness in these readings could place pressure on markets, bringing global growth fears back in play.

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

09:00 A.M

European equity markets are trading little changed this morning managing to hold on to almost all of the gains posted on Friday which saw the market rallying sharply on the back of positive news out of the EU summit.

Furthermore there was good news out of China over the weekend showing a smaller than expected decline in the important manufacturing PMI and an unexpected rise in home prices calming concerns that the Chinese economy although ‘weak’ and still in need of some stimulus won’t be falling off a cliff with a soft landing still in reach.

Early focus will be on European PMI and employment data with both expected to show a fairly bleak picture with no signs of any improvement in the offing, however with expectations of rate action by the ECB anyway already at an elevated level further declines might just swing the ECB into action when they meet later in the week to set interest rates.

The ongoing Libor scandal is also expected to stay in the headlines with banks are likely to continue to underperform due to the prevailing uncertainty regarding how big the fallout and how expensive the scandal will be.

Overall sentiment remains positive, however it wouldn’t be too surprising if at least some moderate profit-taking would be setting in at some stage today with worries about weak growth and the health of the Spanish and Italian banking sectors are remaining.

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

11:00 A.M

Eté à haute tension pour les marchés financiers

L’incertitude plane toujours sur la capacité des dirigeants européens à faire preuve de cohérence et de cohésion pour sortir la zone euro de la crise dans laquelle elle s’est enfermée depuis deux ans. Logiquement, les Bourses font preuve d’un grand attentisme alors qu’un n-ième sommet de la dernière chance se réunit. Avec à la clef, un regain de volatilité.

Le scénario de 2011 paraît de plus en plus sur le point de se répéter cette année. L’an dernier, les marchés évoluaient dans une bande assez étroite de fluctuation, avant de corriger violemment durant l’été, marqué par 12 séances consécutives de baisse, du jamais vu. Fera-t-on pire en 2012 ?

Depuis l’an dernier, la crise de la dette, jusqu’ici contenue à des « petits » pays de la périphérie, s’est étendue à des poids lourds (Italie, Espagne). L’effet de domino se confirme. Mais les dominos sont de plus en plus gros. Face à des enjeux financiers croissants, on se demande si les dirigeants européens disposent des moyens suffisants pour éteindre un nouveau départ d’incendie.

Jusqu’ici, les débats sont figés entre les tenants de plus de croissance et d’une mutualisation des dettes à l’échelle européenne et ceux poussant vers plus de fédéralisme et de discipline budgétaire. Tout le monde a conscience que la survie de l’euro se joue en ce moment. Et tout le monde semble s’accorder sur la nécessité d’aller vers plus d’unité fiscale et sociale, ce qui veut dire plus d’intégration et des abandons de souveraineté. Mais le rythme des politiques est toujours trop lent par rapport à celui des marchés. Et l’intervention des banques centrales, sorte de respirateur artificiel de l’Europe et du monde, montre ses limites. Il faudra sans doute aller à de nouveaux pics de volatilité et une hausse des coûts d’emprunt insupportable pour les pays les plus endettés pour que des mesures d’urgence soit prises, en attendant que les mécanismes institutionnels (ESM) se mettent en route.

Or tout ceci n’intervient pas à un moment opportun. La croissance ralentit de manière inquiétante. Cela concerne toutes les économies, y compris la Chine où les autorités monétaires pourraient engager une politique monétaire plus accommodante. La confiance des agents économiques recule. La macro-économie et la politique manquent de clarté. Et cela commence à transparaître dans les comptes des entreprises ou dans leurs prévisions de résultats. Certains analystes envisagent des mouvements de révision en baisse des résultats compris entre 10% et 15%.

Réaction logique : les investisseurs sortent des marchés (baisse des encours en assurance-vie). Ils cherchent avant tout la protection de leur capital, plutôt que de jouer à vouloir capter les mouvements de balancier de la Bourse de plus en plus brefs et violents. Autant de facteurs qui promettent un été volatil et qui obligera les investisseurs à la plus grande vigilance.

Par Fabrice Cousté, DG de CMC Markets France - www.cmcmarkets.fr.

12:30 P.M

Heading into lunch, Monday’s session sees the euphoria sparked by last week’s EU summit cooling somewhat – with stocks still benefitting but off session highs, while the euro pauses against the dollar.

Finland and the Netherlands planning to block the ESM from buying bonds in secondary markets served to remind the market that despite the latest measures, key underlying issues in the EMU remain unresolved.

ESM bond buying requires unanimity, but this now seems unlikely. This also further reinforces the view that EU leaders are unable to unite on policies, painting an uncertain future of the Eurozone.

PMI manufacturing data from the EMU however wasn’t as bad as feared with the June flash estimate of 44.8 being revised to 45.1, unchanged versus May. The data points to a stabilization in confidence after declines seen in the months before. That said, the data suggested little room for recovery later in the year, while German manufacturing activity fell at its fastest rate in three years.

In the UK, manufacturing PMI surprisingly jumped to 48.6, a much better than expected result. But, the pick in manufacturing reflects a rebound following May’s unexpectedly sharp fall. Despite this upbeat result, the outlook for the UK manufacturing sector still looks bleak.

A continuation of weak data this week will add to speculation that the ECB will cut interest rates by 25bp to 0.75% and the BOE will pump more QE by a further GBP50bn to GBP375bn, though will keep rates on hold. Macro conditions are likely to deteriorate further in Europe, which would see risk assets continue to struggle. With worries of global growth intensifying, markets are hoping to hear that both banks are voting for further easing.

Overall, the week and the 2H of year kicks-off in a subdued manner, perhaps the calm before the 2Q earnings storm on the corporate calendar next week. Looking ahead, attention will be on the ISM manufacturing index report, which is likely fell to 51.5 from 53.5 in May.

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

16:00 P.M

The ISM came in much lower than expected however more importantly below the psychologically crucially 50 mark which indicates a contraction. A closer look shows that the situation will likely worsen in the months ahead, which new orders showing an especially huge drop also well below a reading of 50 from just over 60 compared the previous months. It seems that a strong US Dollar combined with a continuing deterioration of growth in Europe seems to increasingly be taking a heavy toll on manufacturing in the US with renewed calls for stimulus measures by the Fed expected not to be too far off.

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

17:00 P.M

Heading into the end of the session, European stocks have registered modest gains, but the euro’s rally has ended against the dollar. Dutch and Finnish governments planning to block ESM bond buying – a measure announced at the EU summit last week –has sapped confidence. Opposition here indicates that cracks remain within the Eurozone, with key underlying issues remaining unresolved. The news also reinforced the view that EU leaders are unable to unite on policies, painting an uncertain outlook of the Eurozone.

Stocks on Wall Street dropped sharply after data showed that US manufacturing sector contracted in June for the first time since July 2009. The ISM came in much lower than expected, but more importantly below the psychologically crucially 50 mark which indicates contraction. A closer look shows that the situation will likely worsen in the months ahead, with new orders showing an especially huge drop also well below a reading of 50 from just over 60 compared the previous months.

It seems that a strong USD combined with a continuing deterioration of growth in Europe seems to increasingly be taking a heavy toll on manufacturing in the US. As such, renewed calls for stimulus measures by the Fed may not to be too far off.

PMI manufacturing data from the EMU however wasn’t as bad as feared with the June flash estimate of 44.8 being revised to 45.1, unchanged versus May. And, UK manufacturing PMI surprisingly jumped to 48.6, a much better than expected result. The better data out of Europe has helped to support European markets, together with hopes that a continuation of poor economic data will prompt central banks to start easing.

This week’s focus will be US jobs data on Friday – again any nasty surprises will hear calls for QE increase in volume. In Europe, the ECB’s rate decision Thursday. If the ECB cut rates or announces new unorthodox measures to offer some respite to markets, it would suggest that the ECB thinks EU leaders have done enough to contain the crisis for now.

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