(MENAFN- ProactiveInvestors - UK) Accendo Markets 09:43
FTSE 100 Index called to open -25pts at 5665 with futures having fallen back from late recovery highs of 5730 around the US close to make a few more tests of yesterday's 5657 lows. For now the level is holding up which is good news for adventurous bottom-picking bulls however we remind them of the steep and accelerated February downtrend which requires significant work before being reversed and that the declines of yesterday put the index back in a bear market -20% from last May's highs. Watch levels: Bullish 5710 Bearish 5650.
The negative opening call comes as the global equity rout that hit Europe and the US extended to Japan where stocks slid their most in 6 months (-5.5%). The key banking sector is being singled out for stress from a dangerous cocktail of slowing economic growth more widespread use of negative interest rates financial market turbulence a protracted commodity market depression (notably oil) and rising bad loans (from commodity exposure) which could affect their ability to repay debt.
The growing fears of another banking sector crisis saw safehavens like gold silver and fixed income bonds favoured along with the Japanese Yen (JPY) whose continued strength despite the BoJ taking interest rates negative only a week ago remains a hindrance to Nikkei exporter names. An oil price almost 10% off its recent recovery highs is also keeping the sheen off commodity sector sentiment adding to weak financials and hurting the Aussie ASX (-2.8%).
US markets again closed in the red Monday with banks underperforming amid much talk of Credit Default Swaps (CDS) - a la Big Short - while safe havens Gold and the Japanese Yen found favour among the risk averse which appears to make up a large contingent of the market this week. Bourses did however manage to close off their lowest levels thanks to a late rally in the energy sector with the ever present bargain hunters pouncing on what they perceived to be oversold stocks. Has the pendulum indeed swung too far? or not far enough? Note the S&P hit 22-month lows.
CNBC's Jim Cramer decided 'not far enough' after perusing his back-of-an-envelope checklist yesterday: No clarity from the Fed no resolution to political uncertainties no end to the collapse of China (or should I say the very slight slowing of its economic growth) no bottom in sight for commodities no sign of oil price stability. The list goes on but it gets boring.
In focus today will be the US Business Optimism and JOLTS Job Openings as key data points before Fed Chair Janet Yellen's testimony on Weds and Thurs. Note weak German trade data this morning which may add to fears of Eurozone growth problems and a global slowing economy.
Crude prices remain unstable (well done Jim) after the slight gains of yesterday failed to break 4 days of downtrend. WTI in particular looks to be headed sub-$30 again today amid a continued lack of cohesion within OPEC.
Gold is set for its longest winning streak in four years having breached $1200 yesterday and languishing currently in the lower half of its recent range with Chinese markets shut for lunar New Year holidays. Note a weaker USD and Cramer's checklist remaining devoid of ticked boxes could set the scene for further gains into the latter half of the week.
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