Chinese GDP data overnight has fallen to its lowest level for six years and whilst it is in line with expectations a little risk aversion has set into the markets overnight and this morning. It is the industrial production and retail sales numbers that have worried investors causing Asian stocks to decline during their session and the dollar has perked up recouping some of yesterday’s losses. Whilst many Asian stocks have been rallying for months on the prospect of further stimulus from central banks in the region, in particular the PBOC, concerns over the Chinese economy have been voiced by not only the Federal Reserve, but the IMF as well recently.
Toda’s major event is the ECB meeting and press conference at 13.30 UK time. Here investors will be keen to hear what Mario Draghi has to say about the QE program and the ECB’s thoughts on the ongoing Greece negotiations. Greek banks continue to rely heavily on the ECB for their funding and the ELA is the only thing that is preventing capital controls being imposed. The euro will be in focus throughout the conference as in the previous two ECB meetings it has declined sharply, which after all remains one of Mario Draghi’s key aims. EURUSD trades at 1.0645 at the time of writing.
These two issues focused on in today’s Outlook have the potential to cause serious problems for markets and if a Grexit occurs in conjunction with a Chinese hard landing, we could have our next market explosion on our hands.