Europe to open higher as the pound slips
The following guest post is courtesy of Michael Hewson, Chief Market Analyst at CMC Markets. More of Michael’s research and analysis can be found at CMC’s website here.
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After a pretty turbulent start to 2016, European equity markets enjoyed the rare luxury of a positive week last week, despite a negative finish on Friday, with banking stocks posting their first positive weekly finish this year, while mining stocks posted their fifth successive weekly gain in a row.
Even oil and gas stocks finished the week in positive territory, despite the fact that oil prices finished the week lower, as the so called Saudi, Russia oil deal lost some of its significance.
As far as this week is concerned the cues are slightly more negative as markets in Europe look to open lower, ahead of some key preliminary manufacturing and services PMI data from France and Germany for February.
Amidst concerns that growth is stalling in Europe’s two largest economies weaker readings here are likely to reinforce the narrative that current ECB monetary policy is not having the effect policymakers want it to.
Cutting rates into negative territory may have the intention of pushing banks to lend money, but they aren’t likely to do that if they have large numbers of non-performing loans or have to improve their capital positions, due to higher capital requirements.
The French manufacturing sector is expected to slip back to 49.9 from 50, while the services sector is expected to show a slight improvement to 50.4 from 50.3.
Germany’s economic activity in February is expected to soften slightly with manufacturing expected to slip to 52.1 from 52.3 and services to 54.8 from 55.