A mixed session in Asia clouds the European open

Indices struggle for momentum

A mixed performance between US index futures and regional stocks muddies the waters somewhat for the European open. The Germany30 index is registering marginal gains so far, given that the US indices were only up around 0.1% during the Asian session.

China sets 2019 GDP growth target

At the National Party Congress, China declared an official 2019 growth target of 6.0-6.5%, within market expectations, but some might focus on the lower band from the ~6.5% declared for last year. Nevertheless, the markets seemed to embrace the “realistic” target frame, and a mild uptick in risk appetite was seen. The yen weakened versus the US dollar, edging back toward the 112 mark for USD/JPY.

USD/JPY Daily Chart

Source: OANDA fxTrade

RBA holds rates, not so dovish in comments

The Reserve Bank of Australia kept rates at a record low of 1.5%, as expected, but the wording of the accompanying comments/statement was little changed from the last meeting. There had been a growing expectation that there may be a more-dovish bias in the statement, but that was not forthcoming. The central bank affirmed its GDP and inflation outlooks but also acknowledged that a few indicators for the Australian economy had suggested domestic growth had slowed in the second half of 2018. For the global economy, it said the outlook remains reasonable, though downside risks had increased. Global financial conditions were still accommodative, it added.

Service sector to keep sentiment positive?

The US ISM non-manufacturing PMI for February is expected to continue to out-perform its manufacturing counterpart with an improvement to 57.2 from 56.7, according to the latest survey of analysts. The non-manufacturing PMI has held above the key 50 expansion/contraction threshold since 2010, whereas the manufacturing equivalent has only managed it since September 2016.

The final readings for Markit PMIs for Germany and the Euro-zone are not expected to differ from the flash estimates, while Euro-zone January retail sales are seen rebounding from December’s negative month-on-month print.

December’s new home sales might once again reflect the lagging nature of the housing sector, with estimates suggesting a 9.1% decline from November, which could dent the current fragile risk-on mood.

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