Financial market research and analysis

Our analysts have their fingers on the pulse of the world's financial market news.

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FTSE brittle due to little risk appetite
The apocalyptic Chinese story keeps the headlines busy. The intervention from the PBoC eased tensions at the heart of the storm, yet the chaotic start to 2016 warned of a challenging year ahead of us. The first trading day of the year has clearly wiped away some of the optimism and the risk-off flows dominate.

Shanghai’s Composite opened the day 3.1% lower yet managed to recover later in the session. State-controlled funds bought equities to halt the $590bn worth of sell-off suffered on Monday, and a selling ban for investors would extend beyond a week according to several sources. The US and European equity futures are better bid today but the sentiment remains very much fragile.

The FTSE managed to outperform its European peers in London. The majority of sectors attempt to recover while the energy companies stagnate with oil trading near $37. The depreciation in pound is supportive although the uncertainties regarding the EU membership keep the investors alert in the current global risk-off market.

The UK construction PMI beat market estimates in December. The damages caused by the floods increased demand for homebuilders and materials and we could well expect to see a further expansion in the construction business. Persimmon and Taylor Wimpey gained following the solid PMI read in London.
Materials sector has suffered the lack of momentum in the economic recovery and there is no certainty that the recovery will be knocking at the door in the couple of months ahead. Hence the rise in demand will certainly be temporary and could limit gains in these stocks' market prices once the impact of this one-time event factored in.

Gains remain fragile as any pessimism could easily revive fears and bring along a renewed panic across the global equity complex.