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Losing streak runs into a third day

Heading into the close the FTSE 100 is down over 70 points, with banks leading the way and US markets joining in the selling. 

Traders looking at data screens
Source: Bloomberg

Stock markets appear to be determined to ensure that February follows the pattern set out by January, with steep losses across the board. The week has seen European markets steadily lose ground, and with the retreat moving into its third day there is renewed risk that the panic selling which dominated at the beginning of the year will return to haunt markets.

For once, miners are not at the forefront of the selling in London. That dubious honour goes to banks, which are in full retreat on a heady cocktail of worries – faltering economic growth, concerns about contagion from energy stocks and diminishing expectations regarding a Fed move have all conspired to send bank shares down around the  world.

GSK shares managed to hold onto their gains this afternoon, as the CEO managed to convince investors that its ongoing turnaround plan will yet bear much fruit. From this, to any potential spinoffs, to the debate on the Brexit, the pharma giant’s tone has been very much ‘steady as she goes’. While this isn’t fun for investment banks, investors should be relieved that at least this part of their portfolio remains dull but reliable.

A fourth consecutive weekly rise in US crude inventories has been an inevitable, if unnecessary, reminder that overwhelming supply is the key driver of falling crude prices. Oil has managed to hold its ground today, up from the overnight lows, but bounces continue to be aggressively sold. US economic data was uninspiring, with services sector numbers disappointing and a modest beat on ADP payrolls not enough to inspire confidence. As markets continue to discount the chances of another rate move, the Fed is starting to look dangerously behind the curve. 

FTSE 100 risers and fallers

Company % change Index points
Anglo American +8.55 +1.09
Rio Tinto +4.17 +3.22
Glencore +3.37 +1.26
Antofagasta +2.76 +0.14
BHP Billiton +1.71 +0.88

 

Company % change Index points
Barclays -4.69 -5.29
Aberdeen Asset Management -4.55 -0.41
Shire -4.32 -3.83
Standard Chartered -4.28 -1.92
Vodafone Group -3.90 -8.90

USD/CAD continues falling
Having broken below the $1.40 level, USD/CAD always had the chance of squeezing lower. Now, having reached the $1.385 level, it could well go on to test lower lows at $1.36.The relative strength index has moved heavily into oversold territory but over the last week, USD/CAD has found it difficult to garner support even if the selloff has looked exhaustive.  

USD/CAD chart

WTI jumps on inventory figures
Wednesday has seen WTI bounce having spent the first half of the week selling off. This afternoon’s US oil inventory figures have, for a second month in a row, come in considerably higher than market’s expectations. This has seen the spot price break through both the 50 and 200-moving averages and pop into overbought territory. Considering the importance of the fundamentals in dictating oils movements of late it is debatable how much credence should be given to the current technical picture.

US light oil chart

GBP/USD jumps in afternoon trading
Now that fears over a Brexit have cooled following the prime minister’s question time, and GBP/USD has broken above $1.4450, a new upward move is in progress. Considering the jump we have seen in the last 24 hours and how far into overbought territory the pair has now moved it is debatable how much more of a move can be seen without first taking time to catch its breath.

GBP/USD chart

Thursday 4 February

12pm – BoE inflation report, BoE interest rate decision, BoE asset purchase facility, and MPC voting breakdown: the forecast is for interest rates and the asset purchase facility to remain at 0.5% and £375 billion respectively. MPC members are anticipated to vote 8-1 to keep interest rates on hold, and vote 9-0 to hold the asset purchase scheme at £375 billion. 

1.30pm – US jobless claims: the forecast is for an increase in the jobless rate from 278,000 to 281,000. 

Earnings
Avanti Communications Group, Delphi Automotive, Symantec, Yum! Brands Inc, ConocoPhillips, Dunkin' Brands Group Inc, LinkedIn

Trading Updates
Vodafone Group, Compass Group, EasyJet

FTSE ex-dividend stocks 4 February:
FTSE 100: Imperial Tobacco Group, Unilever
FTSE 250: Betfair Group (2 February, special dividend), Daejan Holdings, Victrex, Stagecoach Group, Edinburgh Investment Trust, P2P Global Investments

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