UK and European stock markets stuttered on Tuesday following a volatile Asian session that saw Chinese stocks end lower despite state intervention.
The FTSE 100 and German DAX indices both chopped around break-even territory having given up early gains as the outlook for China’s economy and stock market remained uncertain.
In addition to the PBOC adding money market liquidity through reverse repos, state-backed funds also bought equities and extended the institutional selling ban beyond this week’s deadline. The choppy price action in China on Tuesday likely reflects an unstable situation in which local investors are selling to government funds. The intervention has served to prevent another circuit-breaker day but is unlikely to aid confidence amongst the largely ‘mon n pop’ Chinese investor base who got a nasty reminder that another August-style drop could be around the corner.
Shares of Volkswagen (DE:VOWG_p) were top fallers on the German DAX on news the US justice department, on behalf of the Environmental Protection Agency (EPA) will sue the carmaker for cheating emissions standards.
Next was top faller on the FTSE 100 after an unexpected drop in sales over the key Christmas period. The catalogue retailer went to great lengths to blame the warm winter weather for the weak sales using a graph correlating the two but did admit to stock problems in its online division. The drop in sales partly reflects Next’s determination not to join the flood of discounts before Christmas, which did at least help maintain profit margins.
US stocks look set for a lower open, mirroring sagging European benchmarks. The performance of top-performing tech stocks including amazon and Netflix (O:NFLX) could influence overall market direction after getting trounced in Monday’s sell-off.
USA pre-opening levels
S&P 500: 6 points lower at 2,006
Dow Jones: 60 points lower at 17,088
Nasdaq 100: 11 points lower at 4,486
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