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Equity markets in turmoil
Not unlike the weather in London today, it never rains but it pours. While it’s said that the darkest hour is often before the dawn, nobody appears brave enough to involve themselves in risk assets this morning.

The drop in oil prices and China’s Shanghai Composite once again triggering circuit breakers sees major European indexes under pressure while government bonds strengthen across the board. Trading in China stopped after 29 minutes amid the Shanghai’s Composite tumbled by 7.04%. Forex reserves in China are also lower than what were expected. At the end of December they stood at $3.33 trillion and given that the IMF has recently said that $2.6T is required to maintain the yuan fix, this worse than expected depletion is only bolstering negativity towards the world’s second biggest economy.

The Dax is amongst the worst performers, down 2.7% and trading below 10,000 with the likes of BMW and Volkswagen providing the most drag.
Even the better than expected factory orders which rose 1.5% month on month in November following a 1.7% mom gain in October has done little to prop up the German index.

Not a single UK sector is in the green this morning as the FTSE sheds 132 points. The 5768 lows posted of the end of August will be watched closely as a fall through here would open a path towards levels last seen in late 2012.

Miners are in trouble as metal prices languish with BHP Billiton (-6.23%), Anglo American (-7.77%) and Antofagasta (-4.73%) all plunging new depths.

Oil, falling to levels last seen in 2003 seems unwilling to bottom out and this is naturally dragging the likes of BG Group (-3.37%) and Shell (-3.24%) lower. The options market in oil is busy as traders appear to be preparing for ever lower prices from here. The cut in global growth forecasts by the World Bank is certainly not a positive for oil demand and the supply glut shows no signs of bullishness for the price either.

A rush to the safety of sovereign bonds is underway, particularly the bund is helping the euro retrace higher against the dollar and the pound and not helping the ECB case for higher inflation levels in the near term.

Gold, also benefitting from its safe haven status has attempted a break above the $1100/oz level is higher for the 4th consecutive day. A move through this would put the metal on a firmer footing to strike higher but it would really need to break above the $1150/oz level to establish itself. Randgold Resources (-0.16%) is benefiting and is the outperformer in the mining sector.

Burberry (-3%) owing to its exposure to China is also underwater, the share price has been falling for several days and while off the lows is now back to levels last seen in October 2012.

If there’s a bright spot, it’s hard to find but Marks and Spencer (+0.18%) is at time of writing the only riser. While food sales were decent, third-quarter sales of general merchandise were down by 5.8% for the thirteen weeks to 26 December. Once again warm weather has been blamed for some of the demise but the stepping down of Marc Bolland is being taken as a minor positive by shareholders.

Persimmon (-0.76%) said on Thursday that its revenue rose 13 percent last year as it built more homes, boosted by strong sales in the second half of the year. Revenue rose to 2.9 billion pounds in 2015, slightly above market expectations. After almost 30 years with the company, Persimmon’s south division chief executive Nigel Greenaway is also taking early retirement. He goes in April.

The Dow at present is called to open down at 16,620 almost 300 points lower from yesterday’s close.
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