Traders have returned from holidays ready for action with world markets staging a number of major moves overnight to kick off 2016.
Stock markets around the world have been plunging to start the week led downward by Chinese indices which fell so much they triggered circuit breakers forcing Shanghai to stop trading for the day early. The Shanghai index finished the day down 6.8% while the Nikkei
and Hang Seng both fell over 3%. Other Asia Pacific PMI reports were also weak, dragging on sentiment and currencies as CNH and AUD fell. JPY, however, rallied on defensive capital flows.
Indices in Europe are also selling off today with the Dax down 4.5%, the CAC down 3% and the FTSE down 2.7%. US indices are also falling this morning with the Dow and S&P trading down 1.8-2.0%. European manufacturing PMIs were mixed with Sweden, Italy and Germany beating the street while the UK disappointed. Interestingly, Greece finally climbed back up above the 50.0 level suggesting the country is starting to recovery from last year’s turmoil.
Speaking of turmoil, events over the weekend in the Middle East have significantly boosted political risk in the region. Saudi Arabia’s execution of a Shiite cleric ignited a tinderbox of strained relations between them and Iran. The two countries have been fighting proxy wars in Syria and Yemen for a while now and the Saudi’s price war could be as much about trying to contain Iran as it is about US shale production.
With Saudi Arabia and ally Bahrain cutting off diplomatic relations after protesters set the Saudi embassy in Tehran on fire, the risk of supply disruptions appears to be on the rise again. Brent and WTI crude are both trading higher this morning but they really need to clear $40 to indicate that a serious recovery has started.
Later this morning manufacturing PMI reports are due for the US and Canada. Chicago PMI, which was announced last week, took a sharp turn lower so early expectations for the US national report could also be subdued.
There have been no major corporate announcements so far today.
Significant announcements released overnight include:
Singapore GDP 2.0% vs street 1.2% and previous 1.9%
Australia commodity prices (23.3%) vs previous (20.0%)
Manufacturing PMI reports:
US Chicago (Thurs 31) 42.9 vs street 50.0
China official 49.7 vs street 49.8 and previous 49.6
China official non-manuf 54.4 vs previous 53.6
China Caixin 48.2 vs street 48.9
Australia 51.9 vs previous 52.5
Japan 52.6 vs previous 52.5
India 49.1 vs previous 50.3
Sweden 56.0 vs previous 54.9
Poland 52.1 vs street 52.3
Spain 53.0 vs street 53.6
Italy 55.6 vs street 54.9
France 51.4 vs street 51.6
Germany 53.2 vs street 53.0
Greece 50.2 vs previous 48.1
UK 51.9 vs street 52.8
Upcoming significant announcements include:
1:00 pm GMT Germany consumer prices street 0.6%
1:00 pm GMT Poland consumer prices street (0.4%)
10:00 am EST US construction spending street 0.7%
Manufacturing PMI reports
9:30 am EST Canada previous 48.6
9:45 am EST US Markit street 51.1
10:00 am EST US ISM street 49.0
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