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The Asian markets set the tone for the day as they all drifted lower, partially instigated by market speculation that Chinese bad debts have significantly increased. Since the mere rumour that China is beginning to suffer some of the challenges of the western world has been taken badly, it looks like tomorrow morning’s HSBC Chinese flash manufacturing PMI figures will be scrutinised more than normal.
Arguably the FTSE has had more reasons than most to remain weak this morning, having failed to break through August’s highs yesterday. However, having moved steadily higher for the last couple of weeks, a reassessment of fair value was probably called for.
The reporting season continues at pace this afternoon, with a plethora of US corporate figures. So far, very few companies have managed to outperform expectations, despite there having been numerous quarters where outperformance was almost expected. This disappointment has managed to dampen enthusiasm. Yesterday’s rally on the back of the poor non-farm payrolls, which inspired a ‘bad news is good news’ mentality, has clearly been short-lived.
For the time being it looks like the 600 plus-point rally in the Dow has come to a halt; but for how long?