Intraday Market Thoughts

Europe to Remain in Spotlight after IMF Meeting

by Kyle Morrison
Sep 26, 2011 6:34

IMF and G20 look to draw up new plan after unproductive weekend, German IFO for further declines, Italian consumer confidence to fall below 100, US New home sales due. Ashrafs latest Premium trades to follow in 40 mins ahead of the London open.

Over the weekend, the IMF pledged it would take decisive action to tackle the Eurozone debt crisis and help support the global economy. There is also talk that European leaders may explore speeding up the start of a permanent rescue mechanism, or European Stability Mechanism, (ESM) bringing it forward a year early from 2013, to 2012.

EU's Olli Rehn said the focus now remains on reinforcing the current 440bn EFSF in order to create a firebreak around Greece, Portugal et al to prevent a spill over to Italy and Spain, with talk that ministers are looking at ways of boosting it to around 3trn, though quite how this will be achieved is not immediately apparent.

Mixed messages remain the order of the day with EU leaders after German chancellor Angela Merkel spoke to German TV last night and said that Greece should not be allowed to default, while at the same time not ruling out a euro area insolvency.

Fears about the economic situation in Europes largest economy could well continue to weigh on sentiment this morning, with the release of the latest IFO data for September, with economic expectations set to fall below 100 to 97.4, and into contraction territory from Augusts 100.1. Germanys other well-known index (the ZEW-investor survery) was charted in Ashrafs latest article showing the likely path to recession for the Ezones largest economy.

The business climate index is expected to fall as well but remain above 100, in expansion territory, falling to 106.5 from 108.70 in August.

Also due, Italy Sep consumer confidence expected to fall further in the wake of the last few weeks uncertain political backdrop as well as all the political haggling over the recent austerity budget. Consumer confidence is expected to fall from Augusts 100.3 to 98.5.

In the US, new home sales for August are due to continue to paint a bleak picture for the US housing market, with expectations that they will fall 1%, adding to Julys 0.7% decline.

Gold and silver prices have continued to fall with silver falling below its 200

day MA for the first time since July 2010. Fridays margin hikes by the CME on not only gold and silver prices, but also on copper could well see further falls in the short term.

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