The equity exodus continues

The slump in global stocks markets continues as the Hong Kong market re-opens after the lunar new year holiday and incurs heavy losses.

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Upon reopening for trading, Hong Kong HS50 finished down 3.85% as investors in Asia played catch-up with the rest of the world. Seeing as the economic slowdown in China is one of the main drivers of the turmoil in the financial markets, it is no surprise Hong Kong endured heavy selling. Mainland China will reopen on Monday 15 February and last night’s move could be a glimpse of what to expect from Asia next week.

The Japan 225 also lost ground overnight as traders are wondering whether the decision by the Bank of Japan to introduce negative rates will actually be effective in boosting inflation. The rallying yen is putting pressure on the BoJ’s stock market as exports will become less competitive. While the FTSE remains below 5600, the outlook for the market will be bearish and the next major support level in sight is 5446. The DAX is still in its downward trend and bears will be looking towards 8500, and rallies will run into resistance at 8900.

The dollar has dipped overnight as the latest uncertainty in the financial markets is likely to prevent the Federal Reserve from increasing interest rates any time soon.EUR/USD is back above the €1.13 mark and the upward trend still holds. Buying-the-dip has been a common strategy for the currency pair, and if it holds above €1.1252 further gains are possible.

Oil is stuck in its downward move and a move back to the 2016 low is possible. WTI bears will be looking towards €27.58 and sellers of Brent are keeping an eye on $30. Gold’s rally continues and while it holds above $1200, fresh 2016 highs are feasible. The soft dollar and flight-to-quality strategy is helping the metal.

Company % change Index points
Fresnillo +5.54 +0.30
Randgold Resources Ltd +4.04 +0.82
DCC +1.69 +0.29

 

Company % change Index points
Standard Chartered -6.69 -2.83
BP -6.23 -14.52
Glencore -5.88 -2.48
Prudential -5.66 -6.57
Aberdeen Asset Management -5.62 -0.48

The day ahead

Corporate reporting:

US: PepsiCo Inc, American International Group Inc

Economic data:

1.30pm – US jobless claims: exp 280,000, prior 285,000

3pm: Day two of US Federal Reserve Chair Janet Yellen's testimony to Congress

10.30pm: RBA Governor Glenn Stevens speaks

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