MARKETS
08:45 A.M

ETX Capital calls the FTSE 100 to open flat, the DAX +16 points and CAC-40 +14 points

Regional markets are to open a touch higher today, extending previous session gains. But indices are likely to trade in a narrow range given the lack of volumes as US markets close for Independence Day. Hopes continue to grow for further central bank easing with ECB widely expected to cut rates and BOE expected to pump more QE during Thursday’s session. Looking ahead to today’s session, UK and EMU services PMI will be under the microscope, with the attention likely to be on the German outcome as data from the country has recently deteriorated. Elsewhere in the EMU, Italy will publish its 1Q budget deficit as a percentage of GDP during the session. But the main focus will be on former Barclays CEO Bob Diamond as he is scheduled to appear before the UK Parliament’s Treasury Select Committee.

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

09:00 A.M

Centre stage will take once again today the Libor fixing scandal with former Barclays CEO Diamond scheduled to appear in front of the Treasury Select Committee answering questions to his role in the scandal. No doubt nobody is envying Mr. Diamond having to appear in front of this committee today, on the other hand it might very well be the case that politicians won’t be quite as hard on Mr. Diamond as many might would expect, not because they are feeling sorry for him but rather as Mr. Diamond statements could potentially implicate politicians and even some British central bankers. Also it will be important that today won’t just be another exercise in public bank bashing in order to gain popularity but that in the months to come politicians and central bankers will be indeed following through on this matter by implementing reforms and necessary changes which would make it at least at lot more difficult for something like this to reoccur in the future.

Trading itself might be on the lighter side today with the US celebrating Independence day and some investors preferring to remain on the sidelines ahead of tomorrow very important ECB meeting. No doubt expectations that the ECB will cut rates are immense and to a big degree already priced into the markets, therefore many question if the ECB will indeed be able to deliver and consider the likelihood that markets might be disappointed with the outcome as high. While nobody really expects that a 25 basis point cut will jump start growth in Europe, it would give a boost more of a psychological and a symbolic nature showing that the ECB is not leaving Europe to their own devices instead is willing to break new ground by for the first time in its history lowering rates to below 1%. Most recently with the ECB having refrained from buying Spanish and Italian bonds despite a sharp rise in yields in the aftermath of the first Greek elections in May, worries increased that the ECB might be taking a back seat in the month ahead with no help be forthcoming even if the crisis would worsen dramatically.

Scheduled for release today are Euro-zone retail sales and PMI services for individual countries of the Euro-zone similar to the weak but stable readings seen in the PMI manufacturing data, today’s figures once again will paint a rather bleak picture with no improvement on the horizon. The fallout however for equity markets should be limited with weak numbers rather seen as putting additional pressure on the ECB and increasing the likelihood of a cut in interest rates tomorrow. Still with a cut in rates widely expected it wouldn’t be too surprising if some moderate profit-taking would be taking place at some stage with markets having risen sharply in the past few days, possibly run a bit ahead of themselves even if rates are lowered and the Libor scandal having temporarily taken attention away from the rather dire situation in Europe which of course sooner or later will be catching up with markets again.

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

12:30 P.M

Markets are under pressure today, snapping a two-day winning streak this week which extended from last week’s rally spurred by the EU leaders summit. We are seeing clients cut positions after poor economic data from the region, while a dearth of volumes due to a closed US market (for Independence Day) has left markets rather directionless.

Furthermore, the recent risk rally across global markets appears to be alluring clients into booking some profits. Today’s price-action is likely to continue until the ECB and BOE policy decisions tomorrow. Some traders just don’t like to be fully exposed to events which might be changing the current trend in a major way, so would rather prefer to get in later at a less favourable price but with much lower risk.

What has worried some participants today is that both the Swedish and Polish central banks did not cut interest rates, retaining current policies during their regular monthly meeting. This does not necessarily bode well for the ECB tomorrow, further underpinning the cautious mood in Europe.

Euro zone PMI services data was decent, but after the decline seen over the past few months, it is not too surprising that a bit of a bounce has taken place here. With no major data from Europe due for the remainder of the session, the spotlight will turn on former Barclays chief Bob Diamond who threw in the towel yesterday over Libor manipulation. Diamond will appear before the UK Parliament’s Treasury Select Committee at 13:00 GMT in London. Ahead his appearance, Barclays shares are struggling, and the stock could be in for another round of whipping when Bob takes the mic.

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

17:00 P.M

Heading into the end of the session, European markets are on course to finish the day marginally lower, amid a lack of fresh direction and low volumes. US markets are closed for Independence Day, leading to little activity in markets on both corporate and economic front. Former Barclays chief Bob Diamond is under scrutiny of Libor manipulation at the UK Treasury Select Committee, which is catching most of the attention here late afternoon trade in London.

Today’s price action has seen the end of the global risk-rally that kicked off last Thursday by euro-positive headlines out of the EU summit. Clients have given into temptation, booking profits before the release of key economic data from both sides of the Atlantic due tomorrow and Friday.

Earlier, PMI services data from both the UK and EMU further indicated a bleak picture of two deteriorating economies, but failed to cause a dramatic reaction or shock in markets. Clients instead cautiously squared positions, shrugging off the releases and moved to the sidelines ahead of tomorrow’s central bank policy meetings.

Both the ECB and BOE will meet tomorrow midday, with the ECB likely to cut rates by 25 basis points and the BOE likely to shore up the UK economy with another GBP50billion of QE. The last few months of this year have seen a series of declining economic indicators from both the UK and EMU, together with worrying headlines about the euro zone debt crisis, prompting calls for central bankers to take action to loosen monetary policy.

Other than the central banks, tomorrow sees Ireland return to the debt markets for the first time since its bailout in September 2012, planning to sell EUR500million of three-month bills. Additionally, the Spanish treasury will also test appetite for debt with an auction of bonds worth EUR2billion EUR3billion maturing in 2015, 2016 and 2022.

In the US, it is back to business as usual after the July 4 public holiday, but reality is set to bite participants with the ADP monthly jobs report -- widely seen as precursor to Friday’s key nonfarm payrolls. Weekly initial claims and the ISM non-manufacturing survey for June are also due to be published.

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

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