European update – Investors unconvinced by data

Mixed picture across Europe

Its been a mixed start to trade on Monday, with Chinese data initially giving a boost to the basic resource sector and sentiment on the whole.

Source – Thomson Reuters Eikon

The data was a mixed bag which may explain why it took a little time to settle in. On the one hand, the country has experienced it’s slowest quarter of growth in 27 years, on the other we saw some encouraging beats on the accompanying releases.

This was particularly true of the industrial production number which was more than 1% higher and is giving a boost to basic resource stocks. Ultimately, the trade war is clearly taking its toll but importantly, the slowdown is being managed well at the moment which is perhaps a relief. Of course, things could still get better before they improve so we have to bear that in mind.

Earnings recession to add to Q2 gloom

Stock markets may be at record highs in the US but there’s a very different feeling going into this earnings season than we’ve experienced the last few years. After a year of incredible earnings growth, we’re now facing down the barrel of an earnings recession, with a drop of almost 3% expected.

That will only further support the case for rate cuts from the Federal Reserve, especially if second quarter growth turns out to be as bad as people fear. We kick things off with focus on the banks this week which should offer some great insight into the economic outlook and impact of lower interest rates to come on earnings.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.