European equity markets have gone through the same old song and dance, and any gains made in the early session were gradually eroded as the day went on. It will take a lot for dealers to buy and hold in these market conditions. The movements in the Chinese stock markets have become less erratic recently, but there is a clear downward pattern forming and traders are dreading another black Monday.
The collapse in commodity markets has the macro-economic environment looking dreary, and investors can’t help but feel cagey. Mining and energy companies are keeping the FTSE 100 under the cosh, and given the deceleration of the mineral-hungry economies, it is a theme that will be around for a while.
The Federal Reserve meeting on Thursday is what dealers are waiting for, and the market will be surprised by an interest rate jump, but the Fed will most likely issue a warning that rates will not stay ultra-low forever – this is something we have heard on numerous occasions but still nothing has changed.
In the US, the Dow Jones is down 50 points, at 16,380, and despite only a small percentage of traders anticipating an interest rate hike this week, the sentiment is still on the nervous side.
Volatility will remain subdued until Thursday’s announcement from the Fed, and traders will not be tempted to buy until no change in interest rates has been confirmed. It is a lose-lose situation for the stock market at the moment, because weak Chinese numbers reduce the likelihood of a US interest rate rise, but at the same time they highlight that a major importer of US goods is slowing down.