Spreadex Market Update
Contracting US services sector inspires heavy losses for Brexit-fearing, Brent Crude-baffled Dow, DAX and FTSE
With the latest US flash services PMI far underperforming expectations to dip into contraction territory (at 49.8, a 28 month low), and the new home sales falling back under the 500k mark to 494k, the Dow Jones had no reason not to unleash the kind of major losses that plagued Europe throughout the morning, falling around 230 points as the afternoon continued. That leaves the US index at a week low, its recent gains all but wiped out thanks to the oil and Brexit concerns currently gripping investors.
If the US open was bad for the Dow it was arguably worse for the European indices. The DAX approached a 300 point plunge after the bell rang on Wall Street whilst the CAC dropped by just shy of 3%. The FTSE, meanwhile, fell by around 100 points, the widening losses in its commodity sector (inspired by Brent Crude’s sustained decline) and the troublesome performance from sterling (which, admittedly, has lifted away from its earlier lows) ensuring the index got a swift, if unneeded, reminder of everything that could go wrong in the next few months.
The fact that Wednesday had little truly significant data likely only exacerbated the Brexit fears that took hold following the weekend’s Boris bomb. Tomorrow, then, has the chance to be slightly calmer, the second estimate UK fourth quarter GDP figure (expected unchanged at 0.5%) and the region-wide Eurozone inflation data (forecast at a 15 month high of 0.4%) giving European investors plenty to chew on in the morning before US traders wake up to the durable goods orders and jobless claims in the afternoon.
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