Money Flows before the start of European trading

Following the brutal selloff of Wall Street and Asia, European traders will wake up from the red lights on their screens. Major stock indices will record strong declines in the beginning of the session, and I expect this trend to be maintained, at least to the point of a catalyst - commenting on the Fed policy, developing the debate on the US-China-Europe trade war or positive news about Brexit - although I'm not certain that it will be enough to erase the losses generated this month. The bank and blue chips remain strong. In view of the overall negative picture of stock markets, I expect the health sector to show an increase. It is good to turn our attention to intraday short positions of European indices.

During the trading session, traders will focus their focus on the ECB report since their last meeting on monetary policy. According to Allianz chief economist Mohamed El-Erian, the European Central Bank (ECB) may be prompted to raise interest rates earlier than planned against inflation and different monetary policies. El-Erian, a prominent economist and former CEO and co-operative director of bond giant PIMCO, said central bank interest rates are rapidly diverging. The Federal Reserve has already raised interest rates against a backdrop of US growth, while the Eurozone central bank, the ECB, is preparing caution. The ECB has not yet raised interest rates as 19 countries are still showing signs of regional weakness and vulnerability due to growing tensions in world trade. Asked about the approach the ECB can take to normalize its policy and raise interest rates, El-Erian said the central bank should be very cautious and may not fully signal its next move.

Maybe the most important event of the day comes at 15:30 from the US - the inflation report. One of the main reasons for the sale is the surge in the ten-year government securities yield in the United States. As 10-year bond yields are considered a benchmark for global debt, higher values ​​mean that debt repayments for a whole range of companies also increase. In this way they have to spend more to finance their debts.

Higher values ​​today can send indices deep into corrective territory, with promises for another 3-4 interest rises next year (we exclude what is almost certain for December).

Indicative opening prices of European stock indices:
UKX: 7,040, -59 points down
DAX: 11,492, - 172 points down
CAC: 5,092, -77 points down

Photo: pixabay.com

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