UK GDP ahead

• Quiet day sees focus upon overall market sentiment

• US GDP and consumer confidence paint alternate pictures

• UK GDP ahead

European markets are expected to move higher this morning, following a largely positive session overnight in Asia. The inability of the US markets to reach fresh highs did little to dampen investor sentiment elsewhere despite a poor consumer confidence survey as many chose to focus on the strong GDP figure and a globally accommodative monetary stance. Thus European markets are expected to open higher with the FTSE100 +40, CAC +24 and DAX +48 points.

A lack of economic releases overnight means that traders have had little to get their teeth into and for the most part this means having to tap into the overall market sentiment. The sharp increase in the rate of asset purchases in Japan last month, coupled with expectations that the ECB will move to purchase sovereign debt soon (as shown by the move lower in yields recently), means that there is an underlying feeling that whilst the previous rhetoric surrounding the markets was centred around monetary tightening, this couldn’t be further from the truth. The tumbling inflation that has been seen thanks in large part to oil prices has come at the perfect time, forcing central banks to respond by means of pushing back expectations for that first interest rate hike that everyone is speculating upon. Mark Carney played his best poker face yesterday at the inflation report hearings, stating that the next move the BoE will make is going to be a rate hike. However, we do not need to see another bout of QE to be bullish in such a low interest rate environment.

Yesterday saw very mixed messages out of the US, where a unexpected jump in Q3 GDP was somewhat undone by an equally surprising drop in consumer confidence, which reversed the big spike higher last month. The feeling for many is that US Q3 GDP is going to be about as good as it gets for the time being, as it starts to come back off the massive Q2 figure of 4.2%. The estimates across the likes of the UK economy point towards a more stable rate of growth as rates begin to normalise and the house price frenzy of 2014 starts to cool. Whether we will see a rate hike in 2015 remains a bone of contention at this moment, with inflation likely to dictate rates to a large extent. However, when it comes to the question of where the growth will be in the new year, I feel that there is now an overwhelming feeling that the US more so than the UK will experience a very strong 2015. The impact of the ongoing (and seemingly neverending) downturn in the Eurozone is of course greatly impacting the UK who sees the single currency region as its main trade partner. Also, the impact of Russian sanctions will hit the UK more so than the UK simply due to the size of flows between the two countries. However, one thing that many seem to be ignoring the impact that falling energy prices will have upon both businesses and consumers alike. While many believe that QE has a limited degree of impact upon consumer behaviour (see yesterday’s BoJ minutes for example), one thing that businesses and consumer alike have to buy is petrol. Should we see the falling price of petrol reflected properly at the pump, this is probably the strongest form of stimulus yet because it reaches the pockets of almost everyone. For this reason, I think it is likely that this could be the biggest festive season yet in terms of sales, starting this week for Black Friday.

Looking ahead at the European session, the major event of note comes in the form of the UK Q3 GDO number. Just like yesterday’s US number, this is a second revision and thus there is a possibility that it simply confirms the 0.7% figure revealed last month. However, taking a look at the spike we did see in the US number, there is a potential for significant revisions, causing market moves and thus for this reason, it is well worth watching out for this data point.