Monday: 5 Things The Market Is Talking About

Chinese stocks crash, tensions between Saudi Arabia and Iran are on the rise, and euro-area manufacturing grows at its fastest rate in 20 months. Here are some of the things people in markets are talking about today.

1. China stocks

Trading in Chinese shares was halted for the day at 1:34 p.m. local time after the CSI 300 Index plunged 7 percent in what was the first operating day of China’s new market circuit breakers. More weak manufacturing data and the lifting of a share-sale ban later in the week put pressure on stocks from the start of the trading session. The Stoxx Europe 600 Index lost 2.4 percent by 10:40 a.m. in London, heading for its biggest decline in a month as automakers and miners led the slide. U.S. futures are diving in pre-market trading, while Dow futures are pointing to a loss of over 300 points as of 6:46 a.m. local time.

2. Saudi tensions

Tensions in the Middle East were ratcheted up a notch over the weekend when Saudi Arabia severed diplomatic ties with Iran in response to that country’s reaction to the Saudi decision to execute a leading Shiite cleric. The oil market reaction has been relatively muted so far, with a barrel of West Texas Intermediate for February delivery at $37.43, up 39 cents, on the New York Mercantile Exchange as of 10:47 a.m. London time. Oil had been even higher earlier in the session.

3. Euro-area manufacturing

Here’s a bright spot: Manufacturing in the euro area accelerated at the fastest pace in 20 months in December as a Purchasing Managers Index came in at 53.2, Markit Economics said on Monday. Manufacturing expanded in all nations covered by the report, even Greece. In the U.K. there was less good news for manufacturing as Markit’s gauge unexpectedly dropped to 51.9, a three month low.

4. Flight to safety

With stock markets having a shocker in the first trading session of the year, there are some safe-haven trades that are doing well. The yen climbed to its highest level since October, touching 118.70 per dollar and was at 118.87 at 11:12 a.m. London time. Gold has also begun the year with a rally, as bullion for immediate delivery gained 1.25 percent to $1,074.55 an ounce by 11:16 a.m. in London.

5. The 20 percent world

It is looking more and more like 2016 is going to be a year dominated by politics. The main event will be the U.S. presidential election, but there is also the matter of the U.K.’s vote on EU membership, which could be held as early as June, and Spain is still trying to form a government after its recent inconclusive election.

Forex heatmap

Bloomberg

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell