The FTSE 100 Index is called to open +10pts at 5,880, which is off its worst levels of 5,845 yesterday evening, but also well off its best overnight levels of 5,925 with a late recovery (another dead-cat bounce?) having almost completely retraced.
The sell-off keeps the index in its current down-trend although with potential support again at 5,850 thanks to long-term rising support from Nov 2011. Watch levels: Bullish 5885, Bearish 5855.
The positive opening call comes despite a very mixed session in Asia with Japanese equities delivering a weak catch-up session following Monday’s public holiday. There were some gains in China as investors rush to invest in almost anything rather than hold on to a yuan currency being devalued to maintain competitiveness. Australia's ASX edged lower on persistent commodity price weakness, notably oil falling to a 12-year low of US$30/barrel on expectations of expanding stockpiles amid a global supply glut.
US futures continue to trend lower this morning after a late rally yesterday – JP Morgan’s wails of ‘sell everything on any rally’ and RBS’s expectations for a cataclysmic 2016 seemingly holding true as investors take that advice.
The Fed’s Lockhart indicated that a March rate hike may now be off the cards, adding to fear in the marketplace, fear stoked by the idea that December’s move on interest rates might have been premature. It’s obvious, however, that resurgent credit-induced chaos in Chinese markets is driving the latest round of declines worldwide.
In corporate news, US aluminium giant Alcoa (NYSE:AA) kicked off US Q4 earnings season posting a US$500mln loss, compared to a US$150mln profit for the same period last year and attributed to the obvious - low commodity prices - although it, bullishly and rather conveniently, expects supply to fall short of demand this year.
The print did, however, beat expectations, sending shares in the aluminium producer higher.
The Christmas trading statement from the first of the UK’s supermarkets Morrisons (LON:MRW) showed its first period of positive underlying sales since 2012 and profit before tax (PBT) guidance in-line with consensus.
In focus today we have UK Industrial and manufacturing Production which are seen unchanged and rebounding in November respectively. US Small Business Optimism is expected to edge up along with JOLTS Job Openings and IBD/TIPP Economic Optimism.
Away from data, and given divergent transatlantic monetary policy listen out for comments from the Fed’s Fischer and Lacker and BoE Governor Carney.
Both Brent and WTI are trading at US$30 this morning with only deflationary drivers persisting and now some big investment banks gently encouraging investors to cut and run, saying prices could now go as low as US$16 after their technical wizards analysed the charts.
Gold is flat while we note potential for some good gains moving forward as equity markets suffer. the one head-wind is, of course, the strong dollar that’s sitting at levels not seen since about 2004. If that continues to strengthen then gold’s northerly progress could slow somewhat, but gold is gold and its re-emergence as a haven will likely be relied upon by investors.