A disappointing morning of European data appears to be weighing on investor sentiment ahead of the open on Wall Street. European stocks are trading deep in negative territory early in the session, while US indices are also expected to open lower, with the S&P seen down 8 points, the Dow down 65 points and the Nasdaq down 14 points.
Things seem to be going from bad to worse for the eurozone and as it stands, we’re seeing no signs that this is going to change. If it isn’t slowing growth in Germany, it’s record unemployment in France or growing deflation in the periphery. There are a lot of things to be worried about at the moment and it appears, very few things to be optimistic about. I’m not convinced the ECBs monetary stimulus package will be enough to make much of a difference, but at the same time, I wouldn’t bet on them turning to quantitative easing, which could help, at least not any time soon.
The eurozone confidence surveys that followed the worrying inflation figures didn’t suggest things were going to improve this year. We saw a decline across the board, with everything from consumers and businesses to the services and industrial sectors suffering from falling confidence in August. Given how fragile confidence already is in the eurozone, this makes the task of avoiding another recession very difficult for the leaders there.
It’s a very different story in the US, where the economic recovery is looking very strong. The only problem that exists here, and the only thing standing in front of the first rate hike from the Fed, is the delay in productivity and wage improvements. The first revision to second quarter GDP is expected to confirm growth at 4% on an annualised basis, following the weather driven slump in the first quarter. The country should be on for more than 2% growth this year which is far from great but good enough under the circumstances.
Also being released today is the weekly jobless claims number, which is expected to remain around the 300,000 level, and pending home sales numbers for July, which are expected to show growth of 0.5% in July.
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