All eyes on European events, 2-day FOMC meeting

By Gautam Broker, Research Analyst at CNBC-TV18

German constitutional court verdict on ESM and fiscal pact today

The base case is that six claims filed against European Stability Mechanism (ESM) will be rejected and ESM will be given a go-ahead.

View is based on the fact that ESM received broad parliamentary ratification with 3/4th of the MPs approving it.

Key to watch is whether there are any strings attached which will limit further support in the future.

The verdict is expected to be uploaded on the court website at 10 am CET (1.30 pm IST).

Dutch will go for the polls today following the April collapse of Mark Rutte's Liberal-led government

Multi-party, but pro-EU coalition is being seen as the likely outcome

Both parties in lead: Rutte's Liberals and Diederik Samsom's Labour Party are Pro-EU

Yesterday's average of latest polls suggest Liberals and Labour are tied with 34 seats each

European Commission will lay out a roadmap for common European Union (EU) bank supervision

European Banking Authority is expected to be retained as the key supervising body

Earlier reports suggested that the ECB could start supervising banks receiving ESM funding by 2013

Investors need to watch commentary related to ECB role in supervising banks. It is expected to get a bigger role by ECB

US markets shrug off weak trade data yesterday

Nominal trade deficit was basically unchanged at USD 42 billion, up 0.2% in July

But both imports and exports declined; exports fell 1% while imports slipped 0.8%

Rating agency Moody's warned that US could lose Aaa if next year's budget negotiations fall through

All eyes are on European events and two-day FOMC meeting that will begin today.

US markets at close on Tuesday: Dow Jones rose 0.5% to 13,323.4 and S&P 500 Index moved up 0.3% to 1,433.6. Nasdaq Composite gained 0.02%

European markets at close yesterday: DAX rallied 1.3% and CAC jumped 0.9% while FTSE was down 0.02%. Spain and Italy were up 0.8%

Asian markets gained 0.8-1% today, ahead of European events and Federal Reserve's meeting. SGX Nifty rose 0.4% or 21 points.

Currencies

Moody’s warning and QE expectations weighed heavy on US dollar

Dollar index broke down below 80 and hit a low of 79.87 today

Euro was well above 1.285 to the dollar today morning 

Euro is expected to move higher if German court verdict comes positive today.

Other risk currencies are also in rally mode. Australian dollar was inching closer to 1.05 against the dollar again from low of 1.01 last week

Commodities

Crude was marginally higher yesterday. Brent crude rose 0.5% to close at USD 115.4 a barrel and WTI crude went up 0.7% to USD 97.7 a barrel

API says gasoline stocks went down by 4.2 million barrels but crude stocks jumped 2,21,000 barrels. 

EIA inventory report will be announced today

LME Copper was up 0.3% yesterday, which was flat today 

Gold was rangebound at around USD 1735 an ounce

What to watch out for

German CPI

UK Jobless Claims

EZ Industrial Production

US Mortgage Applications

EIA inventory data