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FTSE lower following US-inspired selloff

The panicked selloff seen in the US markets last night has proven to be contagious as Europe has followed suit, and the FTSE is down 1.75% in the first couple of hours' trading.

City of London
Source: Bloomberg

The FTSE has suffered more than most with the selloff of European equity markets, as its greater exposure to copper companies, miners and energy sector stocks continues to hang around its neck like a millstone.

This morning’s corporate releases might find their messages being engulfed by the broader economic data announcements but are worth digging around for nonetheless. Christopher Bailey, who has been guiding Burberry single-handedly through the year-end sales for the first time, will be feeling suitably pleased as the high-end fashion retailer has seen like-for-like growth increase by 8%, better than expected.

Regardless of the issues arising in the important Hong Kong market, the burgeoning spending power of China’s middle class looks to have taken up all the slack. Barratt Developments has also posted good figures with forward sales up 17% and average selling prices up 8.4%. The outlook for UK interest rates to remain at these low levels for even longer than initially anticipated has helped paint a more optimistic picture for the future in this sector.

Copper has managed the impossible by shifting oil off the top of the commodities watch list. This sudden collapse in the metal by more than 5% has been triggered by the World Bank’s downgrade of global growth for 2015. Although off the top spot oil still remains in focus and the oversold stance in the commodity remains firmly in place.

This morning has also seen the EU’s top court tentatively give its approval to the European Central Bank’s packages of financial assistance to date. With the ECB’s important press conference on 22 January perceived to be the most likely time to confirm a quantitative easing strategy, we are likely to hear increasingly opinionated views in the run up to this event.

This afternoon will also see the Treasury Select Committee try to sweat the Bank of England governor Mark Carney as he testifies on the Financial Stability Report. It will need to be a master class in fancy footwork as he dodges interest rate questions while offering suitably open-ended answers, enabling everyone to interpret his comments to fit their own agendas.

After the 427 point range that the Dow Jones traded in last night we should be in for a calmer day, but with all the information that the markets will have to absorb that might be a forlorn hope.

Today will see both Wells Fargo and JPMorgan kick off the US banking sectors' contribution to the reporting season. This should give us a broad feel for the banks with Wells Fargo being heavily exposed to the US mortgage markets and JP Morgan more focused in the investment sector.

We will also see the latest US retail sales figures after the important year-end sales period. Swiftly following this will be the latest US oil inventories, and almost lost in the day’s events will be tonight’s Federal Reserves Beige Book.

Ahead of the open we expect the Dow to start 95 points lower at 17,518.

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