Daily Stocks Update: Market Bottoming Out? – Jan 6, 2016


Following a weak start to the trading week, US and European equity indices managed to close in the green on Tuesday. The Dow 30 index was up 9.72 points to 17,158.66 (+0.06%), the S&P 500 index closed 4.05 points higher to 2,016.71 (+0.20%), but the Nasdaq ended 11.7 points down to 4,891.4 (-0.24%). The S&P 500 VIX, which is considered a gauge of market uncertainty was down 1.36 points to 19.34 (-6.57%), reflecting a break in market risk aversion.

In Europe, the German DAX closed 26.66 points higher to 10,310.10 (+0.26%), the Euro Stoxx 50 ended 4.46 points up to 3,169.22 (+0.14%), and the French CAC 40 landed 15.18 points up to 4,537.63 (+0.34%). Data from the euro zone economy was actually weaker than expected since the CPI estimates missed forecasts, prompting speculations of additional easing from the European Central Bank down the line.

Meanwhile, the London FTSE 100 was up 43.81 points to 6,137.24 (+0.72%) after the UK construction PMI came in stronger than expected. The services PMI is up for release today and a drop from 55.9 to 55.6 is eyed, indicating a slower pace of industry growth.

Asian markets weighed down by Chinese data once more

Asian equities appear to be off to another weak performance, as the Chinese Caixin services PMI printed another disappointment. In contrast to the government readings that showed small improvements last week, the unofficial reading fell from 51.2 to 50.2 to indicate a weaker pace of industry expansion.

In addition, reports that North Korea has conducted a nuclear test and triggered an artificial earthquake is also weighing on risk sentiment in the region, prompting declines for the Australian dollar and New Zealand dollar while at the same time spurring demand for the Japanese yen.

The Nikkei 225 index is down 198.52 points to 18,175.22 (-1.08%), the S&P ASX 200 index is down 56.13 points to 5,128.30 (-1.06%), and the Hang Seng index is down 235.72 points to 20,953.00 (-1.11%).

Earlier on, New Zealand’s Global Dairy Trade auction yielded a 1.6% decline in milk prices while Canada’s underlying inflation figures (raw materials price index and industrial product price index) posted weaker than expected results. In Australia, the AIG services index showed a decline from 48.2 to 46.3 to show a sharper pace of industry contraction. US ADP non-farm employment change data, Canadian trade balance, and crude oil inventories are due next.

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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.