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Afternoon rally fails to materialise

A new week but the same old fears.

London Stock Exchange
Source: Bloomberg

The worst opening week performance this century was always going to be hard to replicate, and without the worries of market suspension, the Shenzhen index has only fallen by some 5%. Although unimpressive, this performance has confounded those who had been making doomsday predictions of much worse to come. The comparative improvement in the Asian markets has allowed European and US traders to focus on issues closer to home.

Taylor Wimpey has followed the sector template by posting impressive figures and is the latest in a long line of UK home builders to see improving profit margins. However, with the possibility of a Brexit and the change in tax rules to buy to let investors, there are a  few headwinds Taylor Wimpey will have to face this year.

The food retailers have also had the spotlight on them, with Morrison, Sainsbury and Tesco all set to report on consecutive days. Particular attention will be paid to Sainsbury’s statement, as speculative trading in Home Retail Group proves that the markets believe this story still has more to come.

Gold continues to oscillate around the $1100 level as the precious metal desperately clings onto last week’s gains. Black gold on the other had has made no such pretences. The new week has just seen renewed selling and oil traders must be getting increasingly weary of the one way traffic. The imbalance of excessive supply and struggling demand is only likely to get worse in the coming days as the lifting of Iranian sanctions continues to edge closer to when the full force of its production levels will be felt.

In a change from its normal mid-week date, Alcoa will start the US reporting season after the US markets close today allowing the US investment banks JP Morgan, Wells Fargo and Citigroup a spot at the end of the first week’s fourth quarter releases. The investment community will be paying close attention to the ability of corporate America to maintain what have been, up until now, very generous dividend yields.

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