Update – 11/01/16 – by Michela Jaccarini
January 11, 2016Good afternoon everyone.
What a dramatic first week to the trading year!! Last week the Chinese market plummeted on its opening session of 2016 on Monday and again on Thursday, creating a negative ripple effect on all other stock markets. Concerns about the struggling economy are increasing following weak factory activity surveys and falls in the Yuan.
Trading was also suspended for a first time, about 90 minutes before the regular close. The CSI300, the benchmark index against which China’s new circuit breakers is set, plunged 7.21 percent. If that index rises or falls 5 percent, the market halts all trade for 15 minutes. If it subsequently falls by 7 percent, trading is suspended for the rest of the day. In total Thursday, China shares only traded around 15 minutes.
The London stock market saw almost £31billion wiped off its value on Thursday as the New Year global rout sparked by trading turmoil in China and plunging oil prices goes on. Steep falls in oil prices are compounding the worldwide stock market sell-off, with the cost of the benchmark Brent crude collapsing to fresh 11-year lows, sinking below 33 US dollars a barrel during the day.
Gold on the other hand saw a rally up as a result of China’s turmoil. It was seen as a safe haven in times of uncertainty and saw a heavy buying action throughout last week. The Chinese Yuan is very weak at the moment which has instilled doubts into investors over the future. If the country intervenes through stimulus, this could see a further weakness in the currency.
On Friday, the Non-Farm Payroll figure came in positive as 292K, above the expectations of 200K, however the average hourly earnings (MoM) for December came in at 0.0%, below the expected 0.2%. This created a mixed movement in the market; indexes and the dollar got bought, however then reversed back and continued as before.
Today is the start of another trading week following what has been a historical trading week in the markets, one which has been named the worst start to the year in history! Interesting news worth looking at this week would be the crude oil inventories. Last week we saw an undersupply of 5M which pushed oil prices up minimally, what will this week’s supply be? WTI oil is currently trading at 32.57. An oversupply of oil could further push down oil prices to below 30.
Important fundamental data to look out for this week:
Tuesday
- GBP Manufacturing Production (MoM) (Nov)
Wednesday
- CNY Trade Balance (Dec)
- USD Crude Oil Inventories
Thursday
- AUD Employment Change (Dec)
- GBP Interest Rate Decision (Jan)
- GBP BoE MPC Metting Minutes
Friday
- USD Core Retail Sales (MoM) (Dec)
- USD PPI (MoM) (Dec)
- USD Retail Sales (MoM)
Have a good week and good luck!
