We appear to be entering yet another gauntlet in the world of trading. As if traders are being asked ‘who do you trust’? The broad markets have turned extremely cautious the past couple of trading sessions. Even Gold has been tranquil. The problem is that when the markets turn into a consolidated mass that they sometimes explode. Data could prove interesting today. In a short time the German Ifo Business Climate reading will be published, to be followed by the BBA Mortgage Approvals from the U.K., but the climax for the day could prove to be the CB Consumer Confidence marks from the States. American consumers have turned in lackluster purchasing the past month and the significance regarding the whereabouts of financial confidence among households in the U.S. could be a big indicator of things to come. The report from the States while not a hot sword capable of wounding the market mortally, could nevertheless provide enough impetus to push investors off of the fence. September only has a handful of trading days left and October and some of its historically bad tidings inch closer. The question is just how dangerous will this fall gauntlet be?
The German Ifo Business Climate has now been released and missed its expectation coming in with a reading of 107.7 compared to the estimate of 108.4.
While the Fed seemed to surprise many when it backtracked from its early summer prognosis of the American economy – and essentially showed that the cards in its hand were not as strong as it initially believed (missing out on adding another Ace) when jobless and consumer data proved lackluster, investors are now left to ponder what the future holds. Financial institutions have become accustomed to extremely cheap money and while they were glad to know that the ‘drug’ would keep on being delivered it appears that some in the crowd are beginning to acknowledge that may have a substance abuse problem that will have to be dealt with down the road.
FX markets have turned extremely cautious. The EUR, GBP, and JPY have all stayed in tight ranges the past twenty-four hours and it is doubtful that this has occurred because everyone believes that the ultimate true values for these currencies have been found against the USD.
China has turned in some better economic numbers the past couple of weeks, but plenty of questions must be asked about how this has been achieved. Perhaps the better economic conditions in Europe have somehow created a better environment for export but the evidence remains rather thin. Germany’s election results over the weekend were good news for Angela Merkel, but were they good news for Greece? And, oh by the way, Greece’s surplus budget forecast has been called into question this morning by outsiders – namely the Troika which oversees many aspects of the bailout that Greece continues to use and will likely need more of within a few months time.
Durable Goods Orders and New Home Sales data will come from the U.S. tomorrow. Also coming up are GDP numbers from the U.K. and the States on Thursday. Investors in the meantime will have to decide where to cast their stones as monetary policy remains rather malleable. Wall Street has not exactly had a great time since the FOMC Statement. While gaining quickly in the short-term many of those gains have now been given back. Gold stands near 1318.00 as of this morning. The precious metal has been in a consolidated mode the past few days and may prove volatile when speculative forces find that the market is not as balanced as it would appear on the surface. The commodity market as a whole has seen mixed results the past few weeks. Crude Oil appears to have found some resistance, but the grains may start making some folks nervous regarding the harvest prospects in the Midwest of the U.S. in the coming weeks.