Red alert once again

As the close looms, the FTSE 100 is 150 points lower, suffering heavy losses as oil prices dive once more.

Oil spill aflame
Source: Bloomberg

The end of January, when markets raced higher, seems such a long time ago. Major indices are rapidly shedding the gains they made in the second half of January, as a cocktail of worries returns. The first of these is the oil price, which has rediscovered its old habit of diving like a stone, helped in no small part by the absence of any rumours about another OPEC meeting.

The session started with oil firms in the red, as BP’s results sent the shares into a tail spin, but the company has been joined at the bottom of the index by miners and insurers. The former are down as economic growth concerns take centre stage, with this concern not helped by warnings from Fed policymakers, while the  latter are in retreat thanks to China, which appears to be coming up with new and creative ways to try to stem capital flight. The reaction is probably overdone where the likes of Prudential are concerned, but it is hard to remain positive when the tentative rally of the past two weeks is slipping from your grasp.

Adding to concerns was ExxonMobil, which is down 3% as the earnings beat fades amidst the stark reality of a remarkable slump in profits. As crude prices slide once more, thanks to markets suddenly waking up and remembering the massive oversupply story, it looks like this sector will be the trailblazer for any renewed slump in stock markets.  

FTSE 100 risers and fallers
 

Company % change Index points
Hikma Pharmaceuticals +3.25 +0.34
Sainsbury's +2.41 +0.32
Associated British Foods +1.59 +0.68
Berkeley Group Holdings +0.60 +0.10
Admiral Group +0.40 +0.05

 

Company % change Index points
BP -8.69 -22.55
Prudential -8.33 -10.93
Anglo American -7.99 -1.11
BHP Billiton -6.96 -3.86
Admiral Group -0.40 -0.05

Dow breaks 16,200
The Dow Jones having previously struggled to break above the 16,200 level on both 27 and 29 January now shows every sign of tumbling down to just below 16,100 to meet the rising hourly trendline. US markets have been offered little in the way of bullish sentiment from the European trading session and remain underwhelmed by the US reporting season.  

Dow Jones chart

Gold continues to defy gravity
While gold continues to enjoy the support of a rising trendline and is trading above its moving averages, it has regularly shown signs of vertigo anytime it threatens to climb too high. Without the more aggressive trading of the Asian markets, a move above $1130 might be a little too much to expect but, sooner or later, something must give.

Gold chart

USD/JPY continues to drift
The last 24 hours have offered little reason to believe that USD/JPY will not continue drifting towards ¥120 level and ultimately break lower. This action will likely see the pair make its way towards ¥119.

USD/JPY chart

Wednesday 3 February

12.30am – Australian building permits and trade balance (December): the forecast is for a 12.7% decline in building permits, from a 3.57% rise in November. The trade balance deficit is expected to widen to $AUD 2.98 billion from $AUD 2.9 billion. 

1.45am – China Caixin services PMI (January): the services sector is expected to expand to 51.6 from 50.2. 

5am – Japan consumer confidence (January): the report is tipped to show an increase to 43.22 from 42.7 in December. 

9am – eurozone services PMI (January, final): the consensus is for a fall from 54.2 to 53.6. 

9.30am – UK services PMI (January): the services report is expected to drop to 55.48 from 55.5. 

1.15pm – US ADP employment change (January): the consensus is for 246,000 jobs to be added, a decrease from the 257, 000 jobs added in December. 

3pm – US ISM non-manufacturing PMI (January): the manufacturing report is forecast to rise to 55.8, from 55.3. 

3.30 – US crude oil inventories: inventories are anticipated to come in at 3680K, down from 8383. 

Earnings

GlaxoSmithKline, Hargreaves Lansdown, General Motors Co, GoPro Inc, Merck & Co Inc, Mondelez International Inc, ADP

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