Draghi speech the only notable event today

Good morning,

• Slow start to the week seen but things will pick up tomorrow;

• Draghi speech the only notable event today;

• US retail sales and Yellen speech to come tomorrow.

This week offers plenty in terms of tier one economic data and some significant events, unfortunately though today is not one of those days. Despite this, the day has got off to a good start, with European indices posting strong gains and US futures pointing to a similarly positive open.

The last week was pretty grim for the markets as investors opted for a more risk averse approach. This meant European stocks continuing their recent slide and those in the US faltering at some big psychological levels. Today’s strong start ahead of a busy week may be a sign that the recent weakness is short-lived and more record highs are in store for the US.

As mentioned earlier, today is looking fairly quiet, with the only notable event to come being ECB President Mario Draghi’s speech on monetary policy in front of the Committee on Economic and Monetary Affairs of the European Parliament. Given that the ECB has only recently announced a large scale monetary stimulus program, this speech is unlikely to offer much in terms of the proximity of future stimulus efforts and what form they’re likely to come in.

Draghi may be questioned heavily on the selection of stimulus measures that the ECB opted for, given that they have come in for quite a lot of criticism by market participants. The consensus view has been that the ECB took the easy way out and many of the measures announced are going to have very little positive impact. I can’t imagine this therefore having much of a market impact, but as always with comments from a major central bank, you cannot write it off.

The first big day for the US comes tomorrow, with retail sales figures being released alongside manufacturing data. More important though is likely to be Fed Chairwoman Janet Yellen’s testimony on the semiannual monetary policy report before the Senate Banking Committee. Until now the Fed has refused to adopt a more hawkish tone despite the significant improvement in economic performance in the second quarter but that can only go on for so long. Eventually I expect Yellen to hint at a first rate hike in the first quarter of next year and when she does, investors may well freak out. That could well bring the end of these daily records being made and be the start of the next correction.

Ahead of the opening bell, the S&P is expected to open 7 points higher, the Dow 68 points higher and the Nasdaq 18 points higher.