Different Week Same Problems

The week started on a similar note to the last, Chinese stocks fell as the weekend did little in the way to reinvigorate investor confidence. There were two notable differences though as European opening bells rang, the first being that investors were far less surprised. Most hefty positioning came last week as many weren’t given much time to settle in. Friday’s volatile session was largely down to the fact that many didn’t want to get caught in yet another volatility trap come Monday morning. The second noteworthy difference was that the Chinese circuit breaker system would not be joining us. The system has been scrapped after little more than a week, primarily as it was introduced to curb volatility… and evidently didn’t work as well as China had hoped.

So across the board it was the worst opening week to a year for many global indices, here in the UK it was the worst since 2000 as the FTSE 100 dropped 5.3%. But as the dust settles from the frenzied trading of last week, investors may take note of some headlines that took a supporting role last week. We had better than expected US payroll figures for December to make 2015 the second best year for job creation since 1996. Europe also joined the US by posting better than expected figures, showing signs that both economies are improving, the significance of such being dampened by continuing Chinese woes.

Moving on, the week opened with Chinese inflation data, which edged up as expected. This alongside no Chinese intervention gave markets elsewhere some respite, relative to last week’s scenes. Throughout the trading session the FTSE swung both ways and eventually closed down 0.69%. Onto Tuesday and the FTSE finished in positive territory for the first time in a week. Encouraging updates from Debenhams and Morrisons pushed retailers higher as Tesco ended the day top of the index up 6.7%. Also toward the top end of the index was pharmaceutical giant Shire +4.82% after finally completing the takeover of Baxalta. This also helped fellow stocks GlaxoSmithKline (+1.19%) and AstraZeneca (+1.61%) post healthy gains for the day. Keeping the gains modest were the miners as oil suffered another rough trading session, at the time of writing the price per barrel was perilously close to below $30, down 3.81% at $30.57.

Looking ahead we have a fairly quiet day in terms of data tomorrow, taking aside the steady news flow as earnings season unofficially begins. Looking a little further ahead on Thursday we will see the release of the minutes from the BoE’s latest MPC meeting and minutes from the ECB’s December meet.  This may offer more clues as to where the BoE stands on a domestic rate rise and may suggest their thoughts heading into 2016.