Financial market research and analysis

Asian markets traded lower overnight, led by sharply weaker US futures, after Apple cut its revenue forecast. Global markets were already very jittery over fears of a global economic slowdown after a volatile session for stocks on Wednesday. Weak Chinese manufacturing data was the reason for the sell off in the previous session. Apple cutting its revenue forecast, in part due to soft sales in China, was the catalyst for another leg lower in early trade on Thursday.

Apple shocked Wall Street with an extremely rare revenue warning after the closing bell on Wednesday. Owing to economic weakness in China and disappointing iPhone upgrades, Apple announced that it was expecting to undershoot previous revenue expectations by as much as 10%. The news from Apple fed into the areas that have been panicking investors over the past few months; slowing growth in China, the impact of the US – Sino trade war and more generally technology stock valuations. In short there was something for everyone when looking for reasons to sell out. Traders should prepare themselves for another turbulent session.

We are receiving reminders loud and clear that the trade war is a real and serious issue and that it is not about to disappear. If anything, we will now start to see the impact feeding through into the data which will make it all the more real for traders. This isn’t about to get better and a flight to safety seems the only sensible hiding place.
Chinese press reported that the PBoC were considering various stimulus measures to support the economy. This has offered a level of support to the market capping falls.

Low Volume Flash Crash
Anxiety in global markets was also evident in the FX space causing a flash rash in thin volume trade. The yen soared over 3% in a flight to safety, the Australian dollar which is also seen as a proxy for China and emerging markets dropped sharply. The pound dived to $1.2438, a level not seen since April 2017. Flash crashes are rare occurrences. However, given the elevated levels of trepidation in the markets, plus very thin volumes, we know markets aren’t behaving as they would typically. As traders return to their desks over the coming days, the risk of a repeat performance will diminish.

Pound Looks to UK Construction pmi
The pound was picking up after hitting a 19-month low. Whilst Brexit fears are giving traders few reasons to buy into sterling, construction pmi data this morning could provide a good distraction. Construction activity grew at its fastest pace in 4 moths in November, despite lingering Brexit uncertainties. Should the pmi data show signs of momentum continuing, the pound could target $1.26. However, any indication that the construction sector was slowing on Brexit fears, could pull the pound back towards $1.25.

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