Unexpected Contraction in Chinese Data Sends Shivers Down Investors' Spines

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Financial Spreads: Spread Betting and CFD Trading

Stock Market Trading

: 24 January 2014

European equities are set to start flat on the open as yesterday's rout leaves traders nervous.

The unexpected contraction in Chinese manufacturing sent shivers down CFD trading investors' spines, triggering a sharp sell off in global stock markets.

However, the size and speed of the decline seems to have been out of proportion with the scale of HSBC's preliminary survey of a mere 450 respondents.

What is more likely is that some weak hands got nervous at the lack of progress in the markets and, fearing a top, liquidated their positions.

The question now is whether or not the rest of the market, which is also looking pretty rally weary, decides to call it quits as well.

In addition to the weak Chinese data, the US saw rising jobless claims and existing home sales which climbed by less than expected.

This meant that the Dow Jones slumped by 161 points to 16,208, with the short-term trend turning slightly bearish.

Stock Market Trading

: 23 January 2014

Following some negative cues out of China, European equities are set to open flat to marginally lower as caution takes hold.

Another sign of economic deterioration from the Chinese economy has put the bulls on the back foot as the HSBC Manufacturing PMI fell into contractionary territory overnight.

Markets have been fairly optimistic so far this year, with the IMF upgrading their forecasts for global growth and the WEF about to chug copious amounts of Champagne at the most bullish Davos meeting since the onset of the crisis.

However, the sources of uncertainty seem to be building up; China is looking a little less stable, there are warnings about the US debt ceiling once again, and we are seeing the increasing possibility of monetary tightening in the West.

As a result, 2014 may not be the easy ride that the bulls had been hoping for.

Amid mixed earnings results, the Dow Jones dropped 13 points to 16,369, with investors starting to notice the slight divergence between the Dow and the S&P 500.

It seems that almost 75% of companies in the S&P 500 have beaten expectations, while some big names like IBM and Johnson & Johnson have disappointed.

Stock Market Trading

: 22 January 2014

We are expecting another fairly quiet day for continental markets but could well see some gains on the open.

In the UK, things will be more interesting as investors should get some insight into how close the BoE is to starting a tightening cycle.

The recent optimism surrounding the UK economy has several analysts predicting that the unemployment rate will nudge down a fraction to the 7% level.

For many of those who've been reliant on loose monetary policy for the last few years, this is a figure that may make them severely hot under the collar.

Having said that, the BoE minutes aren't likely to shed any light on the matter just yet as the MPC guidance simply suggests that the 7% level will be a trigger for the start of discussions.

Therefore, until we actually reach that point, it seems unlikely that a rate hike will even be on the agenda.

Disappointing results for Johnson & Johnson and Halliburton led the decline in US stocks yesterday, with the Dow Jones losing 73 points to close at 16,383.

Continued growth in corporate earnings is seen as being crucially important in maintaining investors' optimism; anything less may lead to further profit taking.

Stock Market Trading

: 21 January 2014

European equities are set to start on a firm footing this morning as the overnight cash injection from the PBoC eases liquidity fears in China.

The Chinese central bank injected $42 billion worth of cash into the system to meet the potential demand around the Chinese New Year at the end of the month.

Persistent fears of a credit crunch and recent data pointing towards a slow down have had spread betting markets concerned that China could be reaching a tipping point.

However, the loosening of money markets has given Asian indices a boost and we are set to see that optimism carrying over into Europe this morning.

Another light day on the economic calendar is only broken up by the German ZEW Sentiment Survey.

Although analysts expect the data to pick up, traders will be looking to see if last week's paltry growth figures have dampened the outlook for the German economy in 2014.

Trading was thin yesterday due to the Martin Luther King holiday in the US, with the futures markets closing rather flat.

However, the PBoC's cash injection has encouraged a sharp rally in global equities, with Dow Jones futures already trading 80 points higher.

Stock Market Trading

: 20 January 2014

European equities are set to open marginally lower this morning following weak economic data overnight from China.

A slow down in growth and capital investment spending in China has added to market jitters. The bulls are looking rather hesitant in their attempts to take the markets higher.

With little on the economic calendar and the US markets closed for Martin Luther King Day, this could be a sluggish session where the bulls are left to hang in the air and deal with their vertigo.

Some encouraging corporate earnings results, in particular American Express and Visa led a rally in financial stocks last Friday.

In turn the Dow Jones rose 60 points to 16,457 closing just marginally higher for the week.

It feels like equities are about to enter a consolidation phase. A phase that will last until investors are able to state more firmly whether the Fed is poised on continuing to taper, or whether the changing of the guard will bring fresh views on dealing with the economic recovery.

By Jonathan Sudaria, 24 January 2014

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