Stock markets in Europe were higher to start the day after trading at their lowest point in four months at the end of last week, helped in part by the latest GDP figures out of Germany, which showed that growth increased more than analysts estimates. Futures markets in the US are also higher while equity prices in Asia are seeing modest declines.
German GDP increased at a rate of 0.5 percent during the first quarter of 2012 (after seeing a drop of 0.2 percent in Q4 of 2011). Markets were expecting only a small gain of 0.1 percent, so the positive surprise was helpful for equity markets and pushed the Euro up off of its weekly lows.
The fact that we are seeing gains at all in the Euro Stoxx 600 is encouraging, as yesterday showed a drop of 1.8 percent as markets seemed to be accepting the possibility that Greece will be forced to leave the Eurozone. But the numbers out of Germany are helping to turn things around, as they show that the debt contagion effects are only having a limited impact on the rest of the EU member nations. Greece has still not yet managed to create a unified government body and another election will be required unless the current president (Papoulias) is able to convince party leadership that a suggested group of non politicians assume official positions.
The other major political story in Europe will enter a new phase, as the next French President (Hollande) is sworn into office today ahead of tomorrow’s meeting with European finance ministers. No major surprises are expected at this meeting, so the focus in markets is likely to turn back to macro releases, with German and Eurozone ZEW surveys scheduled for release (expected to come in at 20 and 3, respectively) and this will be followed during the US session by the release of monthly CPI data, which is actually expected to show deflationary conditions, at 0.1 percent. The previous CPI release out of the US showed a rise in consumer prices of 0.3 percent on a yearly basis.
The NZD/USD continues to drop without seeing anything resembling an upward correction. Major long term Fibonacci support has now been removed and the daily close below 0.7780 suggests a full retracement back into the 0.73s at some stage later this year. Momentum is beginning to slow, so this should bring some caution to those in bear positions. Prudent move is to wait for a bounce back into 4H resistance before entering into new sells.
The DAX is still looking heavy but the downside momentum is stalling as prices consolidate near support in the 6350 region. This is not totally surprising given that this is also where the 100 and 200 day EMAs are clustered but the MACD indicator is showing negative momentum and the series on lower highs on the 4H charts is still showing that the downtrend is intact. The main question however is whether or not we see a daily close below 6350 and this will likely be the move that determines the overall direction for the rest of this year. A downside break suggests a test of the psychological 6000 level first.