UK and European markets are viewing the PBOC leaving the yuan fix basically unchanged as a glass half full in what is still a very uncertain backdrop. Low oil prices, volatile Chinese stocks and the withdrawal of monetary stimulus in the US still loom large over markets. Chinese stocks saw sharp declines again on Monday with the Shanghai Composite losing 5% and the CSI 300 hitting 3-month lows. Reduced liquidity for Chinese banks as a result of capital outflows following the devaluation of the yuan has led to a spike in Hong Kong’s interbank borrowing rate to a record high. It was clearly a rocky ride in the first week of trading in 2016 but investors have stepped back before the precipice of the low prices reached in August to reassess whether last week’s declines are justified. So far in January, the yuan continued to drop, Chinese manufacturing continued to be weak and the US continued to see flat wage growth. None of this is new. The rally today shows that markets are in a state of flux. The conditions are not that of a calm rising bull market or a raging bear market but a volatile sideways price range, still undecided which way to break. With little in the way of market-moving economic data, a bounce back in the price of Brent crude oil after dropping as much 3% on Monday helped the FTSE 100 trade slightly into the positive but still well below 6000. Markets were more resilient in Europe but the German DAX remained below 10,000. Sainsbury’s shares were amongst top risers ahead a possible renewed bid for Argos-owner Home Retail Group and its Christmas sales data which are expected to see it fair the best amongst the big four supermarkets. Shares of both Sainsbury’s and Tesco brushed off rival Asda stepping up the price war with another £500m investment into price cuts. Shares of BG Group were amongst the top fallers on the FTSE 100 after it was revealed Standard Life, a large shareholder opposes its takeover by Royal Dutch Shell. A 2% drop in copper prices has contributed towards a fresh low for shares of Anglo American. US stocks look set to track European gains with a positive open as earnings season kicks off in traditional fashion with former Dow bellwether Alcoa reporting after the closing bell. USA pre-opening levels S&P 500: 6 points higher at 1,928 Dow Jones: 37 points higher at 16,346 Nasdaq 100: 12 points higher at 4,282 CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.