Daily Market Roundup: Markets more convinced of a Fed hike in December, More ECB action to be problematic for Japan

Nick Batsford, CEO of Tip TV, was alongside Mike Ingram, Strategist for BCG Partners, when he opened the Tip TV Finance show on the 2nd of December 2015 to discuss the ECB meeting and its effects on Asia, as well as US manufacturing data, the FTSE 250, UK prices and VW sales following the emissions scandal.

US ISM manufacturing drops but labour market strong

Batsford highlighted FX Street, who noted that the US ISM Manufacturing dropped to 48.6, the lowest level since June 2009, and from the 50.1 level in October. They added that Yellen is likely to acknowledge the labour market strength tonight, and this could be a sign of condition being met for a Fed lift-off on the interest rate hike for December. Ingram reflected this when he noted that this manufacturing data was slightly weaker than expected, yet the market is more convinced than ever for a December hike from the Federal Reserve. He also added that manufacturing is in fact only 8% of the US economy, and therefore the services number is likely to be more indicative of the performance of the economy. On the Fed rate hike, Ingram concluded after December action, he can’t see the 4 hikes in 2016 as predicted due to the fact that it will push the USD to an unsustainable level.

Expectations high for Draghi, but will the action have negative effects on Japan

Ingram outlined that ahead of the ECB meeting, expectations for hyperactivity from Draghi are high, and thus he believed that the central bank has a significant scope for disappointment. He continued that if the ECB does not fulfil on the action it has voiced, and Ingram believed this may cause deflationary problems for Japan, and as a result China and the rest of Asia. He finished by expressing that with the Bank of Japan, it is a question of when and not if, and if Japan does act then where does this leave China?

UK prices on the fall, VW suffering from emissions scandal

Batsford commented on Elliott, who noted that data out this morning from the British Retail Consortium showed that UK prices fell 2.1% in November as retailers geared up for Black Friday early. Non-Food prices fell 3.3%, led by clothing and electricals (-4.3%), faster than October’s 2.7% decline, and the 32nd consecutive monthly drop. Food prices fell a more modest 0.3% with coffee, soybean and feeder cattle all seeing double digit declines. She added that in a survey 70% of Britain planned to do at least some of their festive food shopping at discounters Aldi and Lidl. In terms of Volkswagen, she outlined that the US November vehicle sales dipped to an annualised 18.19 million from a record 18.24 million in October, VW hit hard with a 24.7% decline, with sales of its iconic Golf a drastic 64% lower.

FTSE 250 on the rise

Batsford highlighted that the FTSE 250 extended its short-term rally on Monday, passing range resistance at 17,275. That action has completed a base formation; and triggers the opening of a long trade for the upside potential towards the series of highs starting near 17,750 and stretching to the June all-time peak at 18,393.2 and possibly beyond. The stop is placed at 16,600 for now, according to Batsford.