Financial market research and analysis

Asian markets may well have continued to look softer overnight despite the intervention from the PBOC. Here in Europe, early trade in equities looked a little rosier with mining stocks clambering off yesterday’s lows and sending the materials sector higher by 1.87% on average. But the negative sentiment from yesterday’s sell off is assuring some caution. Copper is retracing some of yesterday’s losses but the upside has been limited and likely attributable to a degree of short covering. The FTSE had established a again of around 0.75% in early trading as broker upgrades and relief rallies ensued but has since relinquished much of it. Similarly any bounce in the Dax has been short lived, despite a bigger than expected fall in German unemployment, has been dragged down by Volkswagen (-5%) as compensation costs start to ramp up in the US.

Next (-4.31%) The CBI data last month indicated that retail sales in the run up to Christmas were weaker than expected and that the forward looking gauge for January was at the lowest since May 2012. Nevertheless, Next plc has weathered many a storm over the past number of years so today’s result is still somewhat surprising. Retail sales fell 0.5pc in the 60 days before Christmas but online sales saw a 2% increase in revenue – this despite the fact that the online retail space is becoming more and more competitive. Warm weather and to some extent that fact that wage growth remains stubbornly absent in the UK have likely not helped but the declaration of a special dividend, to be paid next month, should keep the income investors happy for the time being.

M&S (-1.47%) dragged down on the back of the weaker than expected Next update.

Tesco (+4.29%) raised to buy from hold at Deutsche Bank

Glencore (+4.37%)- mild recovery in copper prices and profit taking. Also news that Chile’s Copec wants to buy Glencore’s Lomas Bays mine.

Royal Mail (+2.43%) Raised to buy at Cantor Fitzgerald.

Aberdeen Asset Management (-3.69%) cut to underweight at Barclays.

The warm weather and lower commodity prices in the UK have clearly been to the benefit of the construction sector. UK construction PMI rose to 57.8 against an expectation of 56.1. Optimism about the sector seems well placed into 2016 with new orders and business activity on the rise. The pound has fallen below the $1.47 level but is off its lows.

Oil prices continue to be choppy and difficult to time. The escalation of tensions in the Middle East is certainly a cause for concern but with the supply glut and the strong US dollar the reaction to it in the markets remains incredibly sanguine. It’s all about oil market share and the lack of desire to lose any of it when it comes to this scenario. Many would expect that production will still remain high but there are still questions about global demand and indeed whether there will be any supply disruptions in the near term

Little on the US macro calendar this afternoon aside from Total vehicle Sales. We call the Dow lower to 1711, 40 points lower.