CMC Markets

Positive Chinese economic data, a win for moderates in French regional elections and no dramatic oil prices declines – yet – have helped European markets rebound from the steepest weekly decline since August.

The FTSE 100 leaped back through the 6000 level but looks vulnerable while beneath Friday’s open. The German DAX reached over 10,440 but is off the highs.

A return to conservative politics in the second round of regional elections in France with ex-President Sarkozy’s party The Republicans asserting itself is being taken well by markets. The French CAC is the best performing stock index in Europe on Monday.

Despite the positive Chinese economic data, the yuan continued last week’s decline with the PBOC setting Monday’s fix at the lowest since 2011. The multi-year lows in the yuan follow Friday’s announcement from a branch of the PBOC announcing a trade-weighted yuan index, composing of 13 different currencies. The introduction of the index right before the Fed is set to raise rates appears to part of a plan to de-couple the yuan from the dollar in case of large appreciation to save China’s exports.

Markets are gearing up for a Fed rate hike but plunging Oil prices could indicate slowing demand at just the wrong time. There are already signs of distress. Credit spreads in the US have widened in anticipation of corporate bond defaults when highly levered companies can’t afford payments at higher rates.

A change in tact from South African President Zuma has seen the second appointment of a finance minister in four days. David van Rooyen will now be replaced by ex-finance minister Pravin Gordhan. Gordhan is an old-hand and much more of a proven entity than van Rooyen. The South African rand and FTSE 100 listed Old Mutual PLC (L:OML) and Mondi (L:MNDI) regained some of last week’s losses on the news but the associated political instability could keep them under pressure.

US stocks look set to rebound from the rout on Friday that saw the Dow Jones drop over 300 points with a positive open. VeriFone Systems (N:PAY) reports quarterly earnings on Monday.

USA pre-opening levels

S&P 500: 9 points higher at 2,021
Dow Jones: 75 points higher at 17,340
Nasdaq 100: 25 points higher at 4,562

"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "

Original Post