The month ahead

Ongoing volatility in emerging-market currencies has sparked a sell-off across global stock markets in recent days, as investors have scaled back risk-appetite due to concerns of the impact from a slowdown in China. 

The fall to 49.5 for the manufacturing output of the country in January has underpinned these concerns and the mining sector is seeing a degree of weakness as a result.

Turkey triggers panic

Turkey has slipped alarmingly quickly from emerging market darling to market danger zone – and the emergency meeting of its central bank was the latest attempt to stem an investor exodus. The contagion factor amongst the exotic currency sector is rather high, and the perceived meltdown is impacting market sentiment.

Fed announcement affects upside

The final and probably most tenuous factor of all is that the Federal Reserve, which began scaling back its monthly asset purchases in December from $85 billion to $75 billion, is to make another $10 billion cut this month. As no mention of the emerging market turmoil was made during the most recent Federal Open Market Committee statement, there is a distinct likelihood that the scaling back of quantitative easing will be linear (while still data dependant) and while earnings in the US have, for the most part, beaten expectations the potential decrease in liquidity is denting the upside.

What should be noted is that 70% of all companies listed in the FTSE 100 derive revenue from overseas, so while the UK economy appears on track any continued emerging market jitters could be to the detriment of the index.

UK banking sector cuts jobs

UK corporate earnings kick off in earnest next month, with Barclays announcing on 11 February. The bank has plans to cut hundreds of jobs in its investment banking division as part of a restructuring, which comes on top of 3700 layoffs announced early last year. Similarly, Lloyds intends to cut back its staff by 1000 as part of a business overhaul.

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