15.01.16 Friday Morning

The second week of 2016 was one of the most volatile in recent history with markets moving up one day before plummeting down the next. Oil was on everybody’s mind hitting 12 year lows below $30 as traders wondered whether we’ve finally reached the bottom.

China
Chinese stocks had a rocky week as investors were concerned about the volatility of the yuan. The Shanghai Composite Index closed down 3.55 percent just above 2900 dropping more than 20 percent from its December high. The key issue is the lack of confidence in the economy and while the yuan remains under pressure to depreciate Beijing can no longer pump liquidity into the economy. 

The People's Bank of China set a slightly weaker midpoint rate for the yuan on Friday, but by keeping the fix steady throughout the week, combined with official statements, they have shown a fierce determination to not let the yuan depreciate. China’s GDP and Industrial production figures will be released next week, this will key in deciding which direction the market will lurch to next.


UK
The FTSE struggled this week as the low oil price put pressure on energy stocks. This resulted in BHP Billiton writing off $7.2 million in US oil assets, dragging down their share price, as well as Anglo American’s and Antofagasta’s.

In more positive news the retail sector showed strong returns, with Sainsburys, Tesco, Debenhams and Morrisons beating Analyst estimates. Only Sports Direct struggled due to an increase in the national minimum wage and a deterioration in trading conditions.

With everything else going on, the possibility of a Brexit remained in the back of investors’ minds however a prominent campaign published a report stating that bankers were unlikely to flee London if the country left the Eurozone. In fact away from the EU’s strangling regulation the UK banking sector would thrive.

 
US
Wall Street had a tumultuous week that ended on a low note. The Dow plunged 400 points on Friday after an oil rout. Hovering near the $30 handle all week, it finally plunged under Friday afternoon leaving a great deal of uncertainty in the market. This combined with China’s economic uncertainty resulted in a significant amount of volatility in the US, with markets losing Wednesday, climbing back Thursday before finally dropping Friday.

Earnings season began with many looking toward the banks to drive sentiment, J.P Morgan started things off well with the company beating expectations and posting record results. Several important lending areas had been as strong as it had ever been according to CEO James Dimon. However Wells Fargo and Citigroup couldn’t follow up, with them both posting mixed results. Both stocks fell, but this was more to do with the market sell off rather than the investment banks earnings.

Looking forward, Bank of America and Goldman Sachs release their trading updates early next week, whereas most of the Tech stocks release their earnings a week later.

Stock of the week: Renault

Renault began the week strongly, reaching highs of 8954 before a disastrous Thursday afternoon rocked their share price.  Police raided the company’s facilities, stating that investigators wanted to check equipment at their factories. Investors instantly started selling fearing that Renault was embroiled in cheating emissions tests, similar to Volkswagen last year. The stock reached a low of 6720, losing 20% in an hour. The company responded resolutely, stressing that the tests have shown “no evidence” of devices designed to cheat emission tests, as a result the share price bounced back to close in the mid 7000’s. Many investors remain concerned of further findings so this remains a volatile stock, however if you’re looking for a high risk high reward play then this could be the stock for you.

Monday January 18th 2016

US Bank Holiday

Tuesday January 19th 2016

02:00 – Chinese GDP figures
02:00 – Chinese Industrial Production
09:30 – UK CPI & RPI
10:00 – German ZEW Economic Sentiment
21:45 – New Zealand CPI

Wednesday January 20th 2016

09:30 – UK Average earnings Index
09:30 – Claimant count change
13:30 – USD CPI
13:30 – USD Building permits
15:00 – Bank of Canada Monetary Policy report and rate statement
15:30 – Crude Oil Inventories

Thursday January 21st 2016

12:45 – Euro minimum bid rate
13:30 – ECB Press conference
13:30 – US unemployment claims

Friday January 22nd 2016

08:00 – French Flash Manufacturing PMI
08:30 – German Flash Manufacturing PMI
09:30 – UK retail sales
13:30 – Canadian CPI