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Last night’s Chinese selloff has once again seen the Asian powerhouse move back into bear market territory for the second time in just over six months. This overnight performance has been enough to trigger a selloff in across the board in Europe. The top five fallers in the FTSE 100 are all miners – a template we have seen all too frequently over the previous twelve months.
The last couple of days might have seen the FTSE flirting with the idea of breaking back above 6000, but this morning’s actions look to have cooled any hopes of that. Brent crude has once again dipped below $30, regardless of rumours that an emergency OPEC meeting might be convened. At these prices, there remains only a handful of nations capable of producing oil at cost-effective levels, and even those have profit margins that leave little to excite.
BHP Billiton has given fresh reason to fear for its ability to pay dividends, as it has announced a $7.2 billion write down on its shale operations. In isolation this would be bad enough but when coupled with the disaster in Brazil, the company’s finances are being seriously tested.
The US reporting season will kick on a gear this afternoon as blue chip finance houses Wells Fargo, BlackRock and Citigroup all release fourth quarter figures. Last night’s confirmation that Goldman Sachs has agreed to pay regulators $5 billion for mis-selling, relating to mortgages, will have seen last second expectations cool somewhat.
The first set of retail sales figures after the important festive season will be closely scrutinised as it may well give an indication as to how robust US consumer spending is. Ahead of the open we expect the Dow Jones to start 231 points lower, at 16,148.