According to a top German research institute, the German economy may slow by a record 9.8% in the second quarter and Europe’s growth engine could
print a 4.2% contraction this year. The sputtering German economy will certainly weigh on the entire European sentiment, but there is not
much governments can do other than loosening their purses’ strings. The European Central Bank (ECB) will continue giving its full support
to the market by massive government debt purchases. So, in the short run, all seems settled from a market point of view, but higher government
spending will end up being a serious headache among the EU nations in the medium to long run. For now, the euro remains a touch below the 1.09
mark. Due today, the Italian industrial production data could confirm a 1.7% m-o-m contraction in February and cap the single currency’s
upside potential sub-1.10.
Across the Channel, pound traders will be watching a series of important economic data before leaving for Easter
break. The manufacturing and industrial production may show a slight improvement in February, as a result of an economic improvement at the
start of the year. The GDP may have improved to 0.1% m-o-m from 0.0% printed a month earlier. But investors know that the data will show a
drastic downturn in March, and the numbers will likely get worse in April, before starting to get better toward the end of the second quarter.
Hence, an encouraging data set could hardly improve the investor appetite. The sentiment in British stock markets will likely depend on the
outcome of the OPEC+ meeting – which could potentially be a historical cut in joint production, and the market’s reaction to the decision.
Activity
in FTSE futures (+0.95%) suggest some optimism at the open, but this could change rapidly.
Pricing in the oil markets suggest that a cut of 10 to 15
million barrel per day may not satiate investors’ hunger and fail to trigger the desired sustainable recovery in oil prices. WTI crude
hovers around the $25 a barrel, slightly better bid relative to recent days. But if today’s decision cannot create the spark that oil
producers wish for, then we can see the price of a barrel retreat back to the $20 level in the coming sessions. Intermediate support is eyed at
$23 bp.
By Ipek Ozkardeskaya
