Spreadex Market Update
China/oil/North Korea fears combine to create toxic market cocktail this Wednesday
A slightly worse than expected services PMI was just the tip of the iceberg for the FTSE this Tuesday; with China’s own services slump already weighing on investors’ minds, Brent Crude made things worse with its first foray below the $35 per barrel mark for 11 years. Of course that sent the UK oil investors rushing for the exit, Premier Oil leading the charge with a 17% fall. In fact the entire commodity sector looked pretty dire, mining big boys Rio Tinto, Anglo American and BHP Billiton all down around 4.5-5.5%. Combine all that bad news and you have a pretty toxic cocktail, one that has seen the FTSE fall by over 1% to leave it firmly in 2 and a half week low territory.
Though Spain drastically underperformed expectations and France, still suffering in the aftermath of November’s terrorist attack, unsurprisingly saw a services contraction, this morning’s Eurozone PMIs were largely positive, with Italy (hitting a near 5 year high) and Germany (at a more modest 17 month peak) both surpassing forecasts, leading the region-wide figure to reach its own 4 and a half year high. Yet the overtly negative tone of the markets allowed little room for region-specific goods news, with the DAX, falling nearly 1.5%, rapidly approaching a 2 and a half month nadir.
If the Dow futures, currently down by around 220 points, are anything to go by this afternoon will be just as bad. The fact investors are in for a big US data dump may not help matters either; the ADP non-farm employment change and trade balance numbers are expected before the bell, whilst the Markit and ISM services PMI (and the latest factory orders) arrive later in the afternoon. It will be interesting to see a) how the markets react to US data now the guiding hand of an impending rate hike is no longer in place, and b) if any good news can break through the thick layer of bearishness currently coating the markets.
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