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Yesterday’s European equity market bounce was short-lived as traders look to have jumped back into ‘risk off’ mode, with many important pieces of economic data being released and many important talking heads speaking today.
First out the traps this morning was the overnight news that Chinese new loans increased from ¥871 billion to ¥1080 billion, better than the expected ¥950 billion. This was then followed by UK inflation jumping back up to 2 and, although this was the government target, few believed they were close to hitting that level.
The ZEW economic sentiment and German sentiment were both weaker than expected, and were the major catalysts behind the EU Stocks50 decline this morning.
Markets are cautiously optimistic that, following Germany’s success in the World Cup, the DAX and Germany will receive a boost in terms of moral and ultimately productivity. However, this could take a little while for the data to reflect this.
Although today looks like a 'risk off' day the underlying bullish trend is currently offering support. We would not want to see the EU stocks 50 break below the 200-day moving average or a rethink might be in order.