(MENAFN- ProactiveInvestors) A glance at the above chart of the FTSE 100 shows it has been a choppy week for equities as turmoil in China and the Eurozone weigh on investor confidence. Last Sunday's referendum revealed that 61.3% of voters had rejected a 'cash for reforms' deal with the country's creditors prompting fears the country may be forced out of the Eurozone. The market's reaction however was relatively muted as many expect either a compromise to be found or the impact from a 'Grexit' to be less damaging than originally feared. The resignation of Greek finance minister Yanis Varoufakis was seen to help ease tensions with a Greek official saying: 'The government is doing everything it can to reach an immediate deal and end this cycle of uncertainty.' Eurozone members have given Greece until the end of the week to come up with a proposal which will be discussed with all 28 European Union leaders on Sunday. Chinese equities also dented investors' appetite for risk as the Shanghai Composite has fallen 30% since hitting a seven year peak in June. Beijing has unveiled a string of measures designed to curb the share market slump including the suspension of several equities to protect themselves from any further falls. Yet the dramatic moves were met with scepticism impacting investors' faith in the government's ability to manage asset prices smoothly. Unlike other major stock markets which are dominated by professional money managers retail investors account for around 85% of China trade which exacerbates volatility. Many argue the rapid ascent in Chinese equities was propelled by a boom in the number of retail investors with the recent correction actually providing a healthy reminder of the risks involved. Macro-economic data across Europe remained relatively unaffected by Greek concerns with German exports rising at their fastest pace this year in May. Seasonally adjusted exports climbed 1.7% while imports increased by 0.4% boosting expectations that Europe's largest economy will post stronger growth in the second quarter. On the domestic front cheaper mortgages and strong job markets in London and central England were driving demand from buyers as UK surveyors reported the biggest house price rises in almost a year. Meanwhile industrial output rose by a monthly 0.4% cent in May beating forecasts from economists who had predicted a drop of 0.2% although manufacturing output continued to fall. Technical analysis of the FTSE 100 illustrates the recent weakness with the blue-chips finding support after a technical correction of 10% took the index back to historical support at 6410. The oscillators are rising out of acutely oversold territory indicating improved momentum while the strong bullish divergence suggests a sharp bounce is possible. 6410 is likely to provide major support while resistance is seen at 6655 6875 and 7030. In conclusion the final countdown has been initiated for Greece leaving investors to focus on broader events. A strong macro-economic backdrop delayed threat of a rate hike in the US and supportive central banks continue to reinforce the case for equities as an asset class with a 10% technical correction seen as an opportunity to employ funds into the market. Concerns about the Chinese economy and progress in nuclear talks between Iran and world powers have weighed on the price of oil. Brent fell over 12% during the past week to $55 a barrel before gaining traction weighing on related equities. Oil major BP (LON:BP.) has fallen back towards six month lows despite agreeing a settlement for civil penalties and damages with US federal state and local governments. BP was responsible for the April 20th 2010 Deepwater Horizon oil-rig explosion that killed 11 men and dumped enormous amounts of oil into the Gulf of Mexico. Although the total promised by BP is the largest ever environmental settlement for a single company it is modest when compared with the sums that those governments had claimed or were potentially looming in the future. The $18.7 billion settlement is circa $10 billion higher than the amount already set aside to pay for the disaster meaning the company is likely to post a first-half loss. Yet the settlement not only provides closure for BP but payments will be spread over the next 18 years easing the financial impact. First quarter results from BP showed their upstream business was hampered by the plunge in oil prices yet their downstream operations which refine crude oil into petrol chemicals and other products were boosted by rising margins. Ironically cheap oil has reduced input costs while a weak Euro-dollar exchange rate and general cost cutting contributed to earnings of $2.6 billion more than double consensus estimates. The impact of lower oil and the final settlement will impact profits this year placing BP on a comparatively high multiple of 15x earnings yet strong growth forecasts puts the company on 14.1x for next year and just 11.2x for 2017's projected earnings. Meanwhile management confirmed the dividend would remain unchanged offering investors a 6% dividend yield. The chart of BP echoes the weakness seen in the wider market over recent months although historical support at 416p appears to be providing a base while the bullish divergence seen on the oversold oscillators implies momentum is improving. BP has been long muted as a possible takeover target from the likes of US giant ExxonMobil and with clarity over settlement combined with the strong dollar could facilitate such a move. Technical support and clarity over the dividend could also make this an interesting entry level for investors. At the time of writing the share price is 424.5p and a tight stop-loss below support at 411.75p offers an attractive risk / reward bias with targets seen at 441.5p 458.6p and 488p. This report was written by Mark Allen – Head of Derivatives at SI Capital Stockbrokers. The writer does not hold a position in BP but client accounts may. The material in this report has come from SI Capital's internal data sources and BP's corporate website.
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