This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
If markets abide by the mantra of starting as you mean to go on, we could be in for a seriously messy 2016, after global indices tumbled on the first trading day of the year. The root of today’s market hysteria was no doubt borne in China, where stocks fell 7%, causing trading to halt under a new ‘circuit-breaker’ mechanism. While the Caixin manufacturing PMI reading pointed towards continued weakness in the sector, today’s selloff is as likely to be reflecting the expected reaction to the impending end of a six-month lockup period for institutional investors share sales. Unfortunately for Chinese regulators, they seem to be learning slowly that less is often better than more when it comes to controlling the stock market.
Selling across the developed market is something that still had one foot in 2015, with the final days of the year having seen significant losses. Despite the attempted recovery seen through the second-half of December, markets look primed for further losses. With the Dow Jones in line for its biggest opening day fall in percentage terms since 1922, the definition of ‘gradual’ could be stretched somewhat by the Federal Reserve should we see selling continue.
Oil prices have begun to show some signs of life, with heightened tensions in the Middle East threatening to cause yet more instability in a region already rife with war and conflict. The split of nations across religious lines is causing the severing of diplomatic ties, with Saudi Arabia and Iran at the centre of this current dispute. With Iran representing the latest entrant to the oil market after years of sanctions, the threat of disruptions to supply will no doubt cause downward revisions to the demand and supply picture for crude, which is in turn driving marginally higher prices.