Inflation figures set to increase market activity

THE POSITIVE reaction in the US stock market to Friday’s disappointing non-farm payroll report should underpin this week’s European open.

GFT expects the FTSE 100 index to start 7 points higher, at 5664, with similar modest gains for the German DAX 30, up 4 points to 6295, and the French CAC 40, up 5 points to 3768.

Today’s session should be quiet, due to holidays in both Japan and the US. Activity is likely to pick up later in the week, when we get unemployment figures in the UK, retail sales from the States as well as inflation figures for the UK, Eurozone and the US. The market has become convinced that the FOMC will embark on a second round of quantitative easing, a view further strengthened by Friday’s weak payroll data.

Therefore, US inflation numbers will be monitored for any nasty surprises, which could yet derail the market’s expectations for QE. US reporting season picks up pace this week. We have Intel, JP Morgan, General Electric and Google all amongst those companies announcing revenues. With the DOW climbing above 11000 on Friday, it is likely strong corporate earnings will be required to maintain its momentum in the coming days.

Mark Outten, Senior Dealer GFT Global Markets UK Ltd.