Just like the sunshine seen in London before midday, the morning’s guarded optimism in markets has given way to risk aversion. Reports of gunfire in Crimea indicate how transient the bullish sentiment really was, adding to disappointing trade figures from China that hit mining stocks. The Ukraine situation may not be dominating headlines as it was last week, but today’s activity shows that markets remain vulnerable to headline risks.
FTSE surrenders gains
The afternoon losses have seen the FTSE 100 surrender the 6700 level, as it heads back towards the lows seen last Monday around 6673. The mining sector continues to bear the brunt, on the back of data that suggests continuing weakness in the Chinese economy and thus a lower demand for raw materials. A close below 6700 may signal that we are in for another test of the steadily-rising trendline that has served as support to this market in many of its darkest hours.
Meanwhile, the IPOs of Poundland and Pets at Home are on the radar this week. Although the former is expected to price around 300p per share, valuing the company at £750 million, IG’s grey market has seen significant activity today, with clients pushing the price over the £1 billion mark and above 400p per share. Our Pets at Home market has seen buying too, with a clear appetite among clients that may well be a microcosm of the activity when these companies actually become publicly-listed.
US markets eager to push higher
US markets have begun the week on the back foot, but they remain in better shape than the FTSE 100. Time will tell whether they are pointing the way higher or playing catch-up with their London cousins. When investors have to deal with signs of a slowdown in China, but also continued US job growth, it becomes difficult to determine the next move. Selloffs may come and go, but there has been an almost ever-present appetite to push the market higher and, with the US economy behind it, it requires bravery to stand in the way.
Gold receives support
Ukraine-inspired tensions have seen gold receive some support during today’s session, putting early losses firmly behind it. The lows from last week around $1330 are still holding, which puts the $1350 level – which was tested several times last week – back in the frame. Copper, meanwhile, recovered some form despite the bleak Chinese data, with the $3-per-pound level holding once again, for the fourth time in three years.
China worries weigh on Aussie
The Aussie has endured a difficult day, with China worries the chief culprit. Almost all of the post-RBA move has been surrendered, and if China concerns persist then yet more ground may be lost.
The news that the UK economy may surpass its pre-crisis peak this summer, earlier than expected, failed to lift cable, which seems minded to test the lows of late February around $1.66. Worries over potential weakness in the previously strong housing sector will feed into this currency cross, even if the current uptrend remains intact.