European update – PMIs, gold, oil

Europe lower on weak PMIs

European stocks are under pressure at the start of the week as a raft of PMI readings painted a gloomy picture for the currency block.

Source – Thomson Reuters Eikon

We’ve become accustomed to seeing weak manufacturing PMIs, not just in the euro area but across the globe as slower growth and the trade war takes their toll. The numbers this morning though were particularly poor and the services sector may now be getting caught up in it all which doesn’t bode well.

The central bank is doing everything it can to support the economy but there’s only so much more it can do and it could be argued that they’re now at a point of diminishing returns. A reluctance to loosen the fiscal purse-strings, particularly in Germany, isn’t giving investors any confidence that the situation is going to improve any time soon.

Mario Draghi is due to speak later on today and may offer a view on this. Given his comments after the meeting a couple of weeks ago in which he unusually called on governments to do more, these remarks may be interesting. The shackles are coming off which may result in more honest and less restricted views from the outgoing President.

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Gold buoyed but vulnerable

Gold ended last week on a positive note and is trading in the green again this morning. That said, it’s not yet broken above $1,530 which may be indicative of a rebuilding of bullish momentum, despite the yellow metal having barely corrected following the summer surge.

A failure to break above $1,530 will draw additional attention back to $1,480, a level that’s a key area of vulnerability for gold. A break below here could trigger a deeper correction, with $1,450 being the next notable area of support.

Gold Daily Chart

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Oil slips on weaker PMIs

Oil prices are tracking European markets lower this morning, understandably knocked by the woeful manufacturing data from the block and the implications for global growth and demand. The US will be next to release its PMIs later today but there isn’t enormous cause for optimism here either. It may not be as bad a case as the eurozone, or close for that matter, but the trend is ugly.

Brent Daily Chart

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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.