It’s been a relatively subdued start to what is set to be a busy week of central bank rate meetings with the FTSE100 underperforming on the back of weakness in the basic resource sector.
Europe
The latest inflation numbers out of China showed that the world’s second biggest economy post its biggest decline in headline CPI for 3 years in a sign that the economy is slipping into deflation, while PPI remained in negative territory for the 14th month in succession.
These concerns over weak demand are weighing on the likes of Glencore, Rio Tinto and the rest of the mining sector, as iron ore prices decline. Anglo American shares are seeing a bit of a rebound after the big falls of last week prompted some takeover speculation.
HSBC is also under pressure on concerns over weakness in the Chinese economy,
Rolls-Royceis the best performer due to another broker upgrade, this time from Citi which lifted their price target to 431p, which is pretty punchy when we haven’t yet broken above the 300p level yet.
US
US markets have started the week in a similarly subdued fashion after the gains from last Friday, which saw the S&P500 close at its highest levels this year, and yields rebound strongly from their lows of the week.
Electric car maker Lucid Group is down today on reports that it will be pushed out of the Nasdaq 100 when the index undergoes its annual reconstitution on Monday of next week. Amongst the other companies leaving the index will be eBay and Zoom Video Communications to be replaced by the likes of DoorDash, Splunk and CDW Corporation.
Given the sharp fall in bitcoin overnight we’re also seeing weakness in the likes of Coinbase, MicroStrategy and other crypto exposed companies.
FX
This morning’s pushback by the Bank of Japan that they don’t see the need to end the negative rate regime when they meet next week, has seen the Japanese yen drop sharply, reversing some of the gains of last week. The whiplash nature of the move suggests that there remains a great deal of uncertainty as to how the BOJ will be able to extricate itself from its current policy settings with the potential that we might see a return towards the 148.10 area in the short term.
Concerns over weakness in China’s economy after the weekend inflation numbers is weighing on the commodity currencies over demand concerns, with the Norwegian Krone and Australian dollar both under pressure as well.
The pound is slightly higher on the day as we look ahead to this week’s central bank policy decision with recent rate cut bets being pared back after the moves from last week had markets pricing on multiple rate cuts by the summer.
Commodities
Crude oil prices have continued to struggle after Friday’s rebound with concerns over weak demand once again serving to cap the upside after the weekend inflation numbers out of China.
Gold prices have remained under pressure, slipping below $2,000 an ounce on the back of the continued recovery in yields, as well as a stronger US dollar as positions continue to get pared ahead of this week’s Fed meeting, and tomorrow’s US CPI numbers.
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