By Naeem Aslam
European and US stock futures are trading higher on the first trading day of the second half of the year, with another reason for traders to feel a little more confident Monday being the news of the first round of the French snap parliamentary election.
France is the second-largest economy in the Eurozone, and no one wants to see the government fall into the wrong hands, as that could cause another wave of anti-globalisation, which is generally not good for economic growth.
However, investors and traders should look at matters from a broader lens.
The current momentum or direction of the price action that we are seeing could actually be determined by the economic data from the second-biggest economy in the world — China.
The fresh PMI reading for manufacturing produced another reading below the 50 mark, which represents contraction territory. The latest data came in at 49.5, and now we have two consecutive PMI readings which are in contraction territory, and this is not so great news for the global economy.
Nonetheless, the overall momentum and direction of trade in Asia were on the upside, which is encouraging risk-takers in Europe and the US.
Overall, in the second half of this year, traders and investors will focus on a number of important factors.
First of all, the AI trend that brings another stellar performance for the US stock indices. For instance, the S&P500 gained another 14.5% on top of last year’s gain, the Nasdaq Composite soared 18.1%, and the Dow Jones Industrial Average moved higher by 3.8%.
The Nasdaq index’s performance is particularly interesting because there have been three consecutive quarters of negative performance, and this marks the longest quarterly winning streak for the index since the post-COVID rally.
The question remains, how long this would continue to push the markets higher and whether the AI trend will continue to move with the same momentum, especially given that we are in the summer months, well known for slower momentum in the market.
Economic docket has some firecrackers
In terms of economic numbers, the German preliminary CPI m/m is due Monday. The forecast for the number is 0.2%, while the previous reading came in at 0.1%.
It is important to understand that the ECB pays attention to the overall CPI data for the Eurozone; however, Germany is the biggest economy in the Eurozone, and if the CPI number begins to move in the wrong direction, it will have an impact on the Euro’s price action.
The EURUSD pair has gained strength on the back of the French elections’ first round, and this is likely to remain the main denominator until we have a full, clear picture.
At the same time, traders would react to the German CPI, and a strong number may actually bring more strength to the euro.
Over to the US, this is an important week in terms of economic numbers, as the economic docket is full of fire crackers.
Monday is primarily about the ISM Manufacturing PMI numbers and ISM Manufacturing prices. The forecast for the ISM manufacturing PMI is 49.2, while the previous number came in at 48.7. As for the ISM manufacturing prices, the forecast is for 55.8, and the previous number was 57.
Bitcoin price momentum improves
The crypto king seems to be recovering from some losses, as the price has moved above the important psychological level of $60,000. It is crucial for the bulls to see the price trading above this important point because if the price breaks below, sentiment is only going to get worse.
The greed and fear index for the crypto sector has also experienced a serious plunge, indicating that more traders are concerned about the price drop than a price rally.
If we look at the recent volume in the Bitcoin ETFs, that doesn’t seem to be that promising as well, and many speculators are now fuelling the argument that the interest among institutional traders has eased off and most may want the price to drop significantly before they actually step back in.
A drop below the 60,000 mark would open the conversation about the next important support level for Bitcoin, which means that we could be looking at the price dropping towards the 50,000 mark. The chart below shows important price levels for the Bitcoin price action
Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.
