February 20th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist

After having the strongest day of the year so far, European stock markets are in consolidation mode ahead of a deluge of economic data and minutes from the BOE first and the Federal Reserve after the European market close. European stocks advanced Tuesday, propped up by a solid German ZEW number. The improved sentiment helped US markets too, with investors shrugging off a dull NAHB housing report - the S&P500 made a fresh high for the year, ending at 1531, not too far off its all-time closing high of 1565 registered in October 2007. As such, traders this morning are pausing for breath but risk remained skewed to the upside. French business confidence rose to 90 on the month versus consensus of 87 and the prior month was revised higher to 87 from 86. German PPI rose 0.8% on the month, stronger than expected thanks to higher electricity costs. Attention now turns to UK jobs data, US housing starts and euro zone consumer confidence figures. The BOE's minutes will be eagerly eyed with markets looking for clues on the MPC's stance on further QE. Fed minutes on the other hand should shed more light on where the FOMC stand on reducing or exiting QE and their view of the US economy. Both releases are potential event-risks, prompting a degree of caution. The upcoming Italian election this weekend may also unnerve the market in the sessions ahead, as will the upcoming US spending sequesters. Room for further upside for these reasons may be capped with markets likely to remain range-bound until we clear both the Italian and US hurdles.


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