European equity markets have sold-off heavily due to the disappointing manufacturing data from China. The Caixin survey of Chinese manufacturing fell to 49.7, its first contraction in 19 months. China has been slowing down for years, and the announcement hammered home the point that the second-largest economy in the world is cooling. Trade tensions between the US and China are ongoing and that adds to the negative view that traders hold about the state of the global economy. In recent weeks there has been heightened fears of a global slowdown, and the latest figures from China overnight have added to those concerns.
The FTSE 100 has a relatively large exposure to commodity companies, so the worry that China is cooling has hit mining and energy stocks hard. China is a major importer of minerals and oil, and dealers are wary their appetite for commodities will fall further. BHP Billiton (LON:BHPB), Rio Tinto (LON:RIO), BP (LON:BP) and Royal Dutch Shell (LON:RDSa) are all lower this morning.
Ophir Energy (LON:OPHR) shares have soared today after it was reported that Medco Energi are in takeover talks with the London-listed company. No monetary amount has been disclosed, but should the deal go through, it would create a robust producer in south-east Asia. Medco are clearly confident in their own ability to perform well given the uncertain outlook in the oil market.
The US dollar index edged up slightly as short covering helped the currency. President Trump suggested he’s open to a potential deal that will end the government shutdown, and that has helped the greenback too. When it comes to US politics, traders know full well the president can be volatile, so this story is unlikely to be short-lived.
EUR/USD is lower due to the firmer US dollar and the underwhelming manufacturing PMI reports from major eurozone countries added to the euro’s woes. The Italian and French manufacturing PMI updates showed the sector is in contraction territory, while the German manufacturing industry is growing at a slower rate.
GBP/USD has been hit by the rise in the US dollar. The latest UK manufacturing PMI report showed a reading of 54.2 in December, which comfortably topped the 52.5 reading that economists were expecting, and the reading helped the pound pullback some of the losses against the dollar.
Amazon (NASDAQ:AMZN) will be in focus today as it was reported earlier this week they are planning an expansion of their Whole Foods business. The firm wants to capture more customers by opening more stores, and the two-hour delivery range should help increase its client base.
We are expecting the Dow Jones to open 377 points lower at 22,950 and we are calling the S&P 500 down 39 points at 2,467.
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