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PMI pain sends European stocks to 3-month lows

bear market

After yesterday’s falls European markets were already looking vulnerable over rising concerns about a global slowdown.


These fears have been further exacerbated after the latest flash PMIs from Germany and France pointed to further economic weakness in June, raising the prospect that both economies could well be sliding into recession.

The DAX has been worst affected after the German government triggered the second phase of its emergency gas plan, over concerns that the economy could well see an energy shortage due concerns that Russia could cut gas supplies heading into the winter months.

The benchmark German index has slipped new 3-month lows, as it looks to pitch back towards the levels last seen in March in the aftermath of the initial Russian invasion of Ukraine.

The FTSE100 has also slipped back on similar concerns about the global economic outlook with the worst performing sector being real estate, as well as basic resources.

British Land is amongst the worst performers as it trades ex-dividend, while continued weakness in base metals, particularly copper, due to worries about slowing demand is dragging on Antofagasta.

The slide in yields, along with concerns about a UK economic slowdown is hurting financials with Barclays, NatWest and Lloyds Banking Group all sliding back.

Anyone thinking of looking to go abroad to escape the bleak economic landscape now has the prospect of further strikes to contend with after British Airways staff became the latest to vote to go out on strike, following in the footsteps of easyJet staff in Spain and Ryanair earlier this month.

The worst performers on the FTSE250 are 888 Holdings after the company warned that half year revenue would be lower than expected due to tighter UK restrictions on gambling and its ongoing problems in the Netherlands.

Trainline is also lower on reports its CFO Shaun McCabe is leaving to join Boohoo, although its future prospects are likely to be affected more by the prospect of yet more strikes on the rail network which are likely to dissuade passengers from making plans to travel by rail, which in turn is likely to affect its full year revenues.   


US markets started the day on the front foot despite a pretty poor set of manufacturing and services PMI numbers for June, which showed sharp falls from the levels in May, tipping both back to levels last seen in 2020.

Occidental Petroleumshares are higher after Berkshire Hathaway topped up its exposure to the business by buying another $529m in shares, pushing its stake up to 16%, and up to a value of around $8.5bn.

Snowflake shares have also popped higher after being on the end of a favourable upgrade from JPMorgan

Despite concerns over rising costs and plunging consumer confidence Olive Garden owner Darden Restaurants posted a decent set of Q4 numbers. Revenues beat expectations, coming in at $2.6bn, while profits slipped back to $2.24c a share, which was better than forecast. The decision to raise prices by 3% doesn’t appear to have affected same store sales which rose by 11.7%, helped largely by its fine dining business which has seen sales rebound to 2019 levels. Its revenue outlook for the new fiscal year is for $10.2bn to $10.4bn, assuming an inflation rate of 6%, although the profits outlook fell short of analyst expectations, coming in between $7.40c and $8 a share.

FedEx is due to report its Q4 numbers after the closing bell later today, after announcing last week they would be increasing the dividend to $1.15c a share as well as announcing a board shake-up. When the company reported in Q3 it kept full year profits guidance unchanged, at between $20.50 to $21.50c a share, and while rising costs are likely to be a challenge, last week’s announcement of a dividend policy suggests this week’s Q4 and full year numbers, should meet, or beat expectations. Q4 profits are expected to come in at $6.87c a share        


The latest PMI numbers from France and Germany have weighed on the euro, with economic activity slowing more than expected in June, raising concerns that both countries are heading into a recession. While ECB policymakers continue to insist that a recession isn’t their base case, all the evidence points to exactly that, which also helps explain the steep fall in German bund yields in the last two days. The latest German PMI appears to show that the economy has lost all of its momentum from the easing of virus curbs, while falling exports and rising inflation slow economic activity.

The pound has held up reasonably well so far, helped by the latest UK flash PMIs for June which were slightly better than expected, however the more forward-looking indicators suggest that business optimism has declined sharply as order book activity slows. Public sector borrowing rose more than expected in May, largely due to higher interest accrued on government debt.

The Japanese yen appears to be making a comeback with the slide in US, European and UK yields prompting some profit taking in the Japanese currency after several weeks of decline, with the US dollar sliding to its lowest levels this week.


The slide in copper prices has continued today, slipping back to levels last seen in March 2021. The fall in copper prices is particularly worrying given its role as a leading indicator of global economic activity. Central bankers and politicians would have us believe that a recession isn’t on their radar. Unfortunately for them, financial market pricing suggests otherwise, and that any final outcome is likely to be about degree, when it comes to how sharp any slowdown is likely to be.

Crude oil prices are struggling to push up from this week’s one-month lows, amidst concern that slowing economic activity will prompt a falloff in demand. This appears to be starting to manifest itself with today’s weaker than expected flash PMI numbers, as well as the sharp slide in yields we are seeing in bond markets.        


Markets were left looking comparatively subdued during Wednesday’s session. The elevated levels of price action on single stocks were dominated by small caps, with the likes of the UK’s AIM-listed Synairgen posting daily vol of 625% against 380% on the month, whilst US-listed TELA Bio came in at 738% against 514%. No specific news was in play here, although these stocks are typically less liquid which in itself can drive intra-day prices.

Crypto markets continue to cool, with the vast majority of instruments seeing price action fall below the monthly equivalents, with Dogecoin being the biggest outlier here. Even that however was limited to a daily print of 132% against 118% on the month.

Brent crude tested six-week lows yesterday as those global recession fears mounted. Not only did this rattle the underlying, with WTI daily vol hitting 51% against a monthly print of 40%, but It has also been driving that continued bout of volatility in Norway’s energy sector-focused stock index, with a daily reading of 42% against 29% on the month.

As for fiat currencies, Pound – Aussie Dollar has been in focus with the cross threatening a breakout from the sideways channel it has been trading in for the last three months. Daily vol here sits at 10.42%.



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