It’s been a tough start to the week for equity markets and futures are pointing to a continuation of that on Wednesday, with indices seen opening slightly lower once again.
While the week so far has been disappointing, I don’t think there’s anything to be concerned about at this stage. We’ve seen a slight pullback in commodity markets which appears to be leading the declines in equity markets and we’re probably seeing a little profit taking following what has been a decent run since the middle of February.
We’ve also seen a rebound in the dollar over the last 24 hours which may continue to act as a drag on commodities and weigh on equity markets but even this is showing little sign of staging a significant recovery quite yet. While I think the short dollar trade may be starting to look overcrowded driven by overly dovish rate expectations from the market, I’m not convinced we’ve seen a bottom quite yet.
And while it’s not been the busiest of weeks on the economic data side, with earnings season winding down and the U.S. jobs report to come on Friday, maybe investors are seeing this as an opportunity to lock in some profits and take a more risk averse approach ahead of Friday’s report.
There’s plenty of data to come today as well, starting with the final services PMI data from the eurozone throughout the morning. We’ll also get unemployment data from Spain, retail sales for the euro area and the latest construction PMI from the U.K.
Things don’t exactly ease up this afternoon either, with the April ADP non-farm employment change figure being released, ahead of Friday’s official non-farm payrolls number. Alongside this we’ll get productivity and unit labour cost data which offers important insight into possible future wages and inflationary trends. This will be followed by U.S. final services PMI, ISM non-manufacturing PMI, factory orders and finally crude oil inventories. Needless to say, all of this should make for quite the interesting session on Wednesday.For a look at all of today’s economic events, check out our economic calendar.
About Craig Erlam
Based in London, England, Craig Erlam joined OANDAin 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 research. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. 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.