Europe will start the week without the aid of U.S. and Asia as President’s Day and Chinese New Year mean both markets will be closed on Monday 19th.
The tone of the market looks set to be mixed as earnings season continues with some positive results expected, but an air of caution is prevalent among investors.
“From a macro perspective you’re likely to see the data is mixed right now,” said Khuram Chaudhry, Head of U.K. & European Quantitative Strategy at Merrill Lynch to CNBC.com.
“In the first few weeks of the year the data came in stronger-than-expected and people who were looking for growth to slow and for the Fed to cut interest rates have had to change their mind-sets,” said Chaudhry.
In this uncertain environment Chaudhry urged investors to focus on fundamentals.
Next weeks’ earnings include: Air-France KLM; Puma; Carlsberg; Petrobras; Iberdrola and Allianz, to name a few.
France’s EADS is set to present details for its cost-saving programme to its workers Tuesday 20th. The programme, known as “Power 8,” is likely to include between 8,000 and 10,000 job cuts. Germany is expected to bear the brunt of the cuts.
Markets will get a litmus test on the strength of the Euro Zone economy on Friday 16th as Germany releases its Ifo business climate data. On average, economists surveyed by Dow Jones Newswires forecast the Ifo to slip to 107.5.
On the political front, U.S. Secretary of State Condoleezza Rice, Israel Prime Minister Ehud Olmert and Palestine President Mehoud Abbas meet to discuss the Middle-East peace process on Monday 23rd. Dick Cheney, U.S. Vice President, travels to Japan and Australia that day to discuss national security and terrorism.
Mild weather predicted in the U.S. could see a softening in the price of oil and the strength of the yen will be in sharp focus following a firming of the Japanese currency at the end of last week.
The general theme of next week seems to be one of caution as equities continue to rally to new heights.
“Whether it’s next week or a week next Tuesday, a lot of the conditions that were in place in the spring of last year are in place now…we are over-due a correction,” warned Michael Hughes, Chief Investment Officer at Baring Asset Management, when speaking to CNBC.com.