China can't keep a lid on it

In mid-morning trading the FTSE 100 is in the red as worries over China and Greece take their toll.

A Chinese flag by a pier
Source: Bloomberg

The speculation that China will loosen its lending policies to try and spur business activity is causing more harm than good as it sends out the message that its economy is in dire need of stimulus, and that is driving dealers towards the door. All the news out of China recently has done nothing to restore confidence in its financial markets, and the ripple effect can be felt in Europe.

The Greek bailout is still hanging over the markets, and the nation is heading for a lose-lose situation whereby even if the package is signed off by creditors it will split the Syriza party wide open.

Sterling has shot up against the US dollar after the UK CPI report showed a surprise increase in inflation. A move away from zero inflation to minimal inflation won’t cause a massive stir at the BoE but it will turn a few heads, especially since at least one member is in favour of hiking interest rates.

Shares in John Wood Group are offside this morning after the firm revealed a drop in revenue and earnings, but the oil services firm upped its dividend and its cost-cutting scheme is going well. As long as big energy companies keep slashing their capital expenditure budgets the price of John Wood’s shares will stay in its downward spiral.

Shares in Persimmon have retreated even though the company continues to produce rising revenue and profits. Any selloffs in Persimmon provide an opportunity to buy on the dips, and the share price of the housebuilder has been driving higher since 2008. High property demand, helped by the low interest rate climate, is keeping the stock attractive.

We are expecting the Dow Jones to open 45 points lower at 17,500. The sentiment surrounding the US futures market has changed, and the concerns over Greece and China are weighing on the market. The US market finished on a high note yesterday, but the tone is very different today as the US follows it lead from the Far East and Europe. 

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