European markets have yet again in negative territory as the huge fall in Oil prices continued to cause issues for global markets. Overnight Chinese export numbers fell sharply to post -6.8% instead of the -5% that was expected. This has spooked the market a little but nowhere near as much as negative China data would have done prior to us being a little more certain about the Fed’s next decision. Elsewhere this morning stocks are under pressure yet again with mining stocks falling after Anglo American (L:AAL) shares plunged to an all-time low dragging a lot of the heavily weighted mining stocks to the downside.
It’s a damning verdict to the practise of diversified mining companies,. A business strategy that UK miners have been pursuing for a while with a Anglo one of the most diversified miners in the world. The strategy is one that is no longer clearly supported by investors, and this morning’s move to suspend dividend payments to shareholders for the first time since the 08/09 financial crisis is just another negative impact in a year that has seen mining stocks plummet.
The Oil story is one that will continue to dominate markets as commodities look to take centre stage in the run up to next weeks Fed rate decision. WTI has continued its move to the downside dropping below $38 a barrel and continuing to weigh on oil stocks, which continue their drag on equity markets.
The big question is where is the low for oil?
We have been calling a low every $10 move on the downside since we traded at $65, and still we continue slide. $20 is the line in the sand that many believe is the production cost limit (which many have speculated about in the past). If we do trade that low, the issue is then how long can the producers sustain a price below that level, and that would depend on reserve levels, which are high due to the continued push in output and failure of any nation to significantly cut production.
Overall we are looking at a fairly busy day in terms of the calendar but nothing big from US later this afternoon. This morning the Eurozone will focus on GDP which could well give the Euro another move after last week’s ECB failure.