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Spreadex Market Update

Monday, July 27, 2015 - Morning Market Update
Connor Campbell - Market Analyst at Spreadex

Return of Chinese market volatility dominates on quiet morning for data

The Shanghai Composite had another sharp downturn in the Asian session this Monday, slipping to 8% in losses, its worst performance in around 3 weeks. Much of the blame was attributed to that 13-month low manufacturing PMI figure last Friday, with investors still spooked by the continual softening of the Chinese economic landscape. And whilst the country’s government have proved to be more than willing to intervene with the market weakness, this latest dramatic fall has worryingly taken place after the supposedly stability-inducing measures of the past fortnight.

Of course, this Chinese choppiness brings with it more headaches for the already dizzy commodities sector; Brent Crude is remaining firm near its 3-month lows, whilst copper suffered its latest undignified decline. Unsurprisingly this had its usual knock-on effect for the FTSE, which slumped to a lifeless open with only CBI industrial orders on the horizon.

The DAX and CAC returned to a familiarly deep shade of red this morning, with the Chinese drama joining slight fears over the false-start the third bailout discussions in Greece have already suffered. Members of the troika should finally arrive on Greek shores at some point this Monday, after a variety of (largely petty) reasons prevented negotiations from getting underway last Friday. The existence of such delaying disagreements, regardless of the severity of their contents, doesn’t point to the kind of open-minded co-operation these negotiations will require.

The Eurozone indices weren’t helped by the weekend’s news that Yanis Varoufakis, at the behest of Tsipras, spent months working on a parallel banking system that, for all intents and purposes, would have dealt with an abrupt switch from euro to drachma; an unwelcome reminder as negotiations begin of the Grexit-stakes that lie at the heart of the saga.

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