More losses for stock markets

The FTSE is down over 90 points in mid-morning trading, weighed down by BP and Shell.

Data on screen
Source: Bloomberg

European equity markets continue to chip away at last week’s gains, as the mantra of selling the bounce continues to be the strategy of choice for traders. The temptation to reduce risk as the FTSE 100 at above 6000 has proven to be too attractive, as once again the index has lost its nerve.

Although Chinese equities had a healthy bounce overnight, the volatility in the Shenzhen‘s price action this year ensures that it will take more than one good session to pull the bulls back in. Macro events might have been the leading driver for the FTSE so far this year, but BP’s profits collapsing has been the catalyst this morning causing the share price to drop by 6.5% in the first few minutes.

Sentiment towards Shell has also been dented, and the two oil majors between them accounted for 55% of the FTSE’s fall. Sainsbury’s made a bid consisting of both cash and shares equating to 161p or £1.3 billion for Home Retail Group, the parent company for Argos, and this package has been enough to push through the deal just before the deadline. This acquisition offers the food retailer an impressive delivery infrastructure in the battle to grab an increasing share of the growing online market.

Remaining with food retail distribution, Ocado has managed to post a second year of profits, up 65% year-on-year to £11.9 million, no doubt giving speculators even more reason to believe that the Amazon interest might turn into something more substantial.

Last night’s results to choose US presidential candidates dealt Republican Donald Trump a blow, as the chances of him becoming the next president fell from 22% down to 12% on the IG digital 100s binary. Although Hillary Clinton had to share the votes in Iowa’s Democratic voting, IG’s US presidential digital 100 still gives her a 55% chance of becoming the first female US president.

The big name US corporate blue chips continue to fire out fourth-quarter updates and today is the turn of Pfizer, Yahoo, Dow Chemical Co and Exxon Mobil among others. Interestingly in this reporting season, 78% of S&P 500 companies that have posted fourth-quarter figures have seen better-than-expected earnings per share, however only 48% have posted better-than-expected sales.

Ahead of the open, we expect the Dow Jones to start 134 points lower, at 16,315.

FTSE 100 risers and fallers (as of 10.05am)
 

Company % change Index points
Hikma Pharmaceuticals +2.81 +0.29
Sainsbury's +1.8 +0.24
TUI +0.92 +0.20
Admiral Group +0.45 +0.06
Merlin Entertainments +0.34 +0.03

 

Company % change Index points
BP -7.89 -20.46
BHP Billiton -6.44 -3.57
Anglo American -6.26 -0.86
Standard Chartered -4.68 -2.24
Rio Tinto -4.60 -3.71

Key charts to watch

 

FTSE 100

The FTSE 100 has fallen below the trend line support at 6015, and is resting on 5952.  If we see an hourly close below 5952 it would add weight to the argument that the market will continue to lose ground. 5916 is the next big support level. Rallies will run into resistance at 6015 and 6027.

FTSE 100 chart

US crude

US crude oil is quickly climbing down from last week’s rally, but while it holds above the trend line support at $31.54 we can’t rule out a bounce. Rallies will encounter resistance at $32.40 and $33.26. If we see an hourly close below $31.54 that would be a bearish indicator and the next big support levels in sight are $30.80 and $29.29.

US light crude chart

GBP/USD

Sterling’s sell-off has been compounded by the disappointing UK construction PMI data, but the currency pair is still in its upward trend. Support is being provided at 1.4320 and resistance will come into play at 1.4445. An hourly close above 1.4445 would be a bullish signal, and the next big resistance level in sight is 1.4493. If we see an hourly close below 1.4320 that would be a bearish indicator and 1.4230 would be the next major support level on the horizon.

GBP/USD chart

The day ahead

Economic data

No major release expected

US corporate earnings

Pfizer Inc, Yahoo!, Dow Chemical Co, Exxon Mobil Corp, Chipotle Mexican Grill Inc

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