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Asian/European Markets Outlook: August 12

Summary

Major indexes in Asia rose substantially yesterday.

European markets rose to a lesser extent.

These rises could be a result of US markets spiking Friday afternoon.

Geopolitical risks lessening (Donetsk/Ukraine, US Airstrikes, Ebola).

Major economic data set to be released later this week.

Asian markets:

Asian markets were up large on Monday (Nikkei +2.38%, Japan TOPIX +1.97%, China +1.38%, Hong Kong +1.29%), but there wasn't much substantial economic data released, or any significantly major news. Given that US markets spiked almost +0.8% after 12:30 on Friday, this could be a result of markets "catching up."

  • So far in "the morning," Asian markets are up small. The Nikkei is +0.14% and Australia is +0.86%.
  • Japan's domestic corporate goods price index for July (measures prices for goods purchased by corporations) rose 4.3% YoY, in comparison to estimates of +4.4%. This miss was very small, and can basically be interpreted as in-line.
  • Coming today: Australia's house price index (est. +1.1%), China's M2 money supply (previous +14.7%), Japan's industrial production and capacity utilization revisions (previous +1% and -0.7%). Japan's Q2 GDP and China's retail sales and IP numbers loom on the horizon.

European markets:

European markets were up slightly Monday, with the CAC40 +1.20%, the DAX +1.90%, and the FTSE +1.00%. This again could be "catch-up," as not much incremental data was released.

  • Great Britain's CB Leading economic index registered at +0.6%, in comparison to the previous of +0.5%. This small increase is slightly bullish for the economy.
  • Switzerland's retail sales crushed expectations, coming in at +3.4%, way above expectations of +0.3%. This is very bullish.
  • Coming today: France's current account (previous -3.1B), Italy's July CPI (est. +0.1%), and the ZEW estimates (est. Euro 41.3, Germany current 55.0). Initial Q2 GDP numbers come Thursday for France, Germany, and the Eurozone.

Geopolitical events:

Overall, it seems as if the threat from geopolitical events is lessening. Even if things flare up, the market has been slow to react to this news. A large-scale invasion in Ukraine would spook markets, but otherwise things seem calmer.

  • US airstrikes are having a positive impact in Iraq, as they have helped drive back ISIS. Kurdish forces have retaken two towns previously lost to ISIL, and U.S. forces have delivered much-needed supplies to Yazidis and others in need. http://wapo.st/Ve0L9V
  • Ukraine's forces are increasingly encircling Donetsk, providing hope for a resolution to the crisis in the country. However, Putin is said to have 200,000 forces at the border, and may be planning an invasion. http://fxn.ws/1lQ68Ua
  • Israel and Gaza have agreed to a temporary truce to negotiate. It seems to be holding, for now. http://abcn.ws/1sGuWCj

Markets had a good day on Monday. We likely won't see much movement until larger economic data is released later this week.

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Additional disclosure: I am long some stocks