European indices are on the front-foot in early trade, with investors taking on a positive tone despite a somewhat concerning slump in German exports for February. On a day otherwise devoid of data, all eyes have been trained on the latest German trade data, with the 2% decline in exports highlighting the continued weakness for the European manufacturing powerhouse. Notably that weakness has been particularly prominent within Europe itself, as exports within the EU fell by a concerning 3.9%. On the flip-side, German exports actually rose outside of Europe, with the US providing the one particularly bright spot given the 10.2% jump in February. Fortunately, the negative implications of today’s 2% decline in German exports were mitigated by a welcome bump in industrial production, with the 2.1% rise in February representing the fastest expansion since January 2023.
Today represents the calm before the storm, with a largely empty economic calendar giving way to a week that sees US inflation, three monetary policy decisions, and the commencement of the third first quarter US earnings season. Coming off the back of a Friday session that brought as many questions as answers for markets, US indices look set for a slow start today. The impressive strength of the US jobs market may be good news for those hoping to see another set of strong earnings for Q1, yet we could be in for a rude awakening when the US CPI inflation gauge is reported on Wednesday.
The expectation of a rise in US inflation does highlight the potential for further dollar upside this week. However, whether that dollar bounce occurs or not, we have seen precious metals enjoy a period of outperformance that took gold back into fresh record highs on Friday. Elsewhere, oil prices should provide a key theme for the week ahead, with the surge seen last week raising inflation concerns as Israel-Iran tensions grew. The 1% decline seen for both Brent crude and WTI does help alleviate concerns for now, but we are likely to see market sentiment become increasingly intertwined with energy prices once we get close to the key $100 a barrel mark.
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