UK and European shares are mostly lower together with the price of oil after another dose of weak Chinese manufacturing data raised fresh doubts over the health of China’s economy.
Adding to concerns, the Chinese yuan was set ever so slightly lower for the first time in two weeks. The modest devaluation may be to reflect the weaker Japanese yen since Chinese authorities have said adjustments would be based on a basket of currencies instead of just the US dollar.
Markets are paring some of the massive stock market gains from Friday when the Bank of Japan set interest rates to negative in order to boost lagging Japanese inflation. It’s natural enough to have a pullback after such strong gains but there could be something a little more to it. Friday’s BOJ-induced rally could have been more relief than belief. As the dust settles, investors are likely concluding that negative interest rates in Japan will not have anything like the same kind of impact as quantitative easing on global equities.
The soft Chinese data prompted another slide in the price of crude oil which had already started to come under pressure after OPEC officials denied talk of a joint production cut between the cartel and Russia. The huge short-squeeze that saw prices surge by 25% in the past few days will probably keep crude above the January 20 low for the time being, but absent any major fundamental catalysts for a recovery it’s hard to see the price above $40 per barrel.
The euro fell versus the pound after a mixed set of European manufacturing data compared unfavourably with a surprise rebound for the sector in the UK. The UK PMI came in at 52.9 in January compared with expectations of a fall to 51.6 from 52.1 in December.
Shares of BT topped the FTSE 100 after the company topped estimates for quarterly profits and news broke that the merger of two of its mobile network rivals could be blocked. Customers switching to BT Broadband and TV services to watch Champions and Europa league football helped the company see sales and profits both rise by 3% over the same period last year. The UK regulator OFCOM is publically pushing back on the proposed merger of O2 and Three on concerns that it will mean higher mobile phone bills in the UK.
Easyjet was a top riser after rival discount airline Ryanair doubled quarterly profits and announced a €600m share buyback.
Shares in the US look set for a weaker start ahead of the latest ISM manufacturing survey and earnings from Google’s holding company Alphabet.
USA pre-opening levels
S&P 500: 11 points lower at 1,929
Dow Jones: 72 points lower at 16,394
Nasdaq 100: 25 points lower at 4,254
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