Europe looks uncertain after major decline in Japan

Traders are treading lightly in Europe this morning after a big decline in Japan overnight. 

Japanese trader watching data board
Source: Bloomberg

Stock markets are struggling to recoup the severe battering they received yesterday and the major sell-off in Japan overnight is weighing on traders this morning. The mining companies are leading the declines in London and the banks are clinging onto small gains – for now. Questions are being asked about the health of the EU banking system, and the cost of insuring against corporate defaults is high. Traders are fearful that if a rally isn’t staged soon, equity markets could fall back into the downward trend they have been in since late January. If the FTSE 100 fails to clear 5769, it could retest yesterday’s low.

The dollar has had a small bounce back from last week’s heavy losses, but EUR/USD is still holding up relatively well considering the disappointing German industrial production and trade balance figures this morning. Also, the currency pair hasn’t been hit by the financial rumblings in Greece and the wider eurozone banks.

Gold is continuing its positive streak as the risk off mentality has seen demand for the metal keep rising. The swing to a negative yield on the Japanese government bond overnight (for the first time ever) sums up how much fear there is in the financial markets. The renewed concerns for Greece’s financial health is also fueling gold buying.

The metal has been trending higher for over three weeks and while it holds above $1183 a retest of $1200 is possible. The oil market is still experiencing choppy trading and it is edging higher this morning, but lately it has struggled to hold on to a rally. The broad move lower since February 4 still holds and while US light crude is sub-$32.50 and Brent is under $34.24 a move to the downside is feasible. 

FTSE 100 risers and fallers (as of 9.30pm) 

Company % change Index points
Legal & General Group +3.5 +1.63
Kingfisher +2.73 +0.77
Tesco +2.43 +1.32
Next +2.41 +0.88
WPP +2.24 +1.50

 

Company % change Index points
Antofagasta -5.40 -0.33
WorldPay Limited -4.06 -0.45
Anglo American -3.07 -0.64
Rio Tinto -3.07 -2.69
BHP Billiton -2.81 -1.62

The day ahead

Corporate reporting:

US: Coca-Cola Co

Economic data:

3pm – US Wholesale inventories: expected -0.2%, prior -0.3%

11.30pm – Australian Westpac consumer confidence: expected -1% , prior -3.5% 

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