Daily Stock Market Update: Temporary Rebound in Equities? – Jan 15, 2016

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US equities rebound, indices up more than 1%

Investors seemed to be back to their risk-hungry selves in the US trading session, allowing equities to open strong and indices to close more than 1% higher for the day. The Dow 30 index was up 227.65 points to 16,379.05 (+1.41%), the S&P 500 index rose 31.55 points to 1,921.83 (+1.67%), and the Nasdaq ended 88.9 points up to 4,615.0 (+1.97%).

The S&P 500 VIX, which is considered a gauge of market uncertainty, lost 1.27 points to 23.95 (-5.04%) to show that a bit of calm has returned to the markets. At the same time, commodity prices recovered with WTI crude oil climbing back above $31/barrel.

European markets not so positive

This upbeat performance wasn’t seen in the European markets though, as the Bank of England monetary policy statement and European Central Bank meeting minutes didn’t seem too optimistic about their economies. The BOE highlighted the risks stemming from falling oil prices, reiterating that this weakened their inflation outlook and delayed a potential rate hike. Still, policymakers decided to keep monetary policy unchanged for now, with one member voting for a hike.

The German DAX is down 166.76 points to 9,794.20 (-1.67%), the French CAC 40 is down 79.05 points to 4,312.89 (-1.80%), and the Euro Stoxx 50 is down 39.25 points to 3,033.77 (-1.28%). Meanwhile, the London FTSE closed 42.74 points down to 5,918.23 (-0.72%).

Risk aversion still present in Asia

Following the ISIS attacks in Jakarta, risk appetite remained weak throughout the Asian session. The China A50 index is currently down around 2% to 9,365.49 and the Hang Seng is similarly weak at 19,579 (-1.23%).

Shares of coal and steel companies have been on the decline once more, following weaker performance of energy-related firms. This could spur weaker demand for Australia’s iron ore exports, which is probably why the S&P ASX index is currently down 16.58 points to 4,892.80 (-0.34%).

Up ahead, US retail sales and PPI numbers are up for release. Consumer spending is expected to have strengthened in December, thanks to the post-Thansgiving and Christmas spending sprees. Traders are likely to pay close attention to the PPI numbers and their potential impact on the FOMC’s inflation outlook since the central bank has reiterated that they are waiting for more evidence that the 2% CPI target will be reached before considering another rate hike.

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.