Consumer confidence figure to dominate US session

• Poor CPI readings provide upside to indices, yet weakens the euro further;

• CPI and German unemployment change figures put yet further pressure upon Mario Draghi;

• Consumer confidence figure to dominate US session as volatility is expected to rise this week.

US markets are hoping for a positive start to the day, where weakened Eurozone CPI has put further pressure upon Mario Draghi to introduce yet further Easing at the ECB. The continuation of a worsening Eurozone is the polar opposite from the UK, where GDP pushed yet higher this morning. In a day dominated by the European data releases, a theme of Eurozone weakness and UK strength dominates a provides a bullish theme to the markets. As such, the US markets are expected to open lower, with the S&P500 -7, DJIA -54 and Nasdaq -16 points.

The euro came in for a bashing again this morning, as inflation pushed further to the downside, increasing the validity of calls for the introduction of a fully blown asset purchase scheme by the ECB. Mario Draghi has been fighting against the plummeting rate of CPI, which has been falling since the beginning of 2012 when it peaked out at 3%. Today’s fall to 0.3% was thus far from unexpected, however the continuation of this downward trend in prices makes for worrying reading and proves to the markets that all the measures introduced so far have been completely ineffective at bringing about price stability or higher growth within the region. Perhaps the most worrying thing about today’s release was the unexpected fall in core CPI from 0.9% to 0.7%, which underlined that the weakness in price growth is not solely an issue which can be explained away by factors such as food and energy, which are largely unaffected by monetary policy decisions at the ECB. Representing the lowest level seen since the financial crash of 2007, this core CPI reading is sure to worry Mario Draghi and could push forward the potential of a QE programme in the near future.

Today’s weak Eurozone CPI reading was also accompanied by a disappointing German unemployment change figure, which saw 13k more people in unemployment, representing the second consecutive month of increased unemployment in the German economy. Overall this continued weakness in Germany, accompanied by an incessantly falling inflation rate means that Mario Draghi is being pushed into a corner to find the solution, and fast. However, despite some calls for the introduction of a fully blown asset purchase scheme later this week, it is highly unlikely with Thursday’s meeting likely to focus upon the intricacies of the ABS scheme that was announced last month.

US markets will be looking forward to a somewhat calm day in the markets from an economic standpoint, where the consumer confidence figure represents the only major release of note. With an economy that is 70% driven by domestic consumption, confidence is a leading indicator of where spending is likely to be in the US for September. Today is really the beginning of the week in a way, where we begin to start seeing really major market moving events come on a daily basis. With this in mind, there is likely to be an element of risk aversion take hold given the likely volatility that could become a regular feature of the markets for the remainder of the week.