Beijing attempts to tame stock market

In mid-morning trading the FTSE 100 has bounced back due to Beijing’s promises to intervene to restore confidence in the stock market.

PBoC building
Source: Bloomberg

China’s economy is still in a tailspin, but Beijing claims it will ensure a soft landing. European equity markets have simmered after the Chinese authorities vowed to stabilise their market, but there’s a sense that it will be hard to tame the Chinese market. The correction we witnessed today is relatively small when compared with yesterday’s declines, and traders will need to see firm action from the Chinese government before they become serious about going long.

Financial uncertainty in Greece and China continues to play on traders’ minds, and today’s session has seen some buying but it won’t last long as there are too many unknowns still hanging over the market. The pound had a muted reaction to the GDP numbers, which were in line with expectations. The numbers were good but nothing that should get variable rate mortgage holders nervous.

BP shares have pushed higher this morning after the company announced its productions plan are broadly flat for the third-quarter. The company’s share price has been tracking the price of oil downwards over the past 12 months and to add to the company’s woes, exploration costs have risen in the past quarter along with write downs in Libya.

Tullett Prebon is in positive territory after the company posted a 20% rise in first-half profits, which is impressive considering the firm has been struggling the past few years with lower market volatility and less risk-taking by investment banks. The UK-based firm is acquiring a commodity broker in the US to diversify its operations along geographical  and product lines. The interdealer broker wants to become less dependent on London investment banks for its core business.

We’re expecting the Dow Jones to open 80 points higher, at 17,520, as the two-day Federal Reserve meeting starts today and traders are anticipating no change of policy. The Fed has been intentionally vague in relation to when interest rates will rise, but traders view this as a sign that the US central bank is in no hurry to push rates higher.

There’s a feeling among traders that Janet Yellen is paying lip service to the idea of a 2015 rate hike, and any hawkish comments are intended as a warning rather than an actual heads-up.  

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