Finance show summary: Why are stocks falling?

It was interesting to start the new trading week that the problem facing traders was actually trying to work out what exactly is the reason for all the weakness. Of course, some might argue that all we are seeing is extremely negative sentiment, largely off the back of China slowdown fears, or simply, a normal reaction to the prospect of a return to “normal” interest policy – after years at the QE punchbowl.

Central bankers - The main culprits?

Indeed, there was an initial discussion between Zak Mir and Marc Ostwald Chief Market Strategist of ADM Investor Services as to whether the Federal Reserve is factoring in the state of the stock market in determining whether/how much to hike interest rates for the rest of the year. His call is that the Fed may be looking for signs of capitulation, before making up its mind as to further action to follow on from its December hike. At least as far as Marcus Ashworth, Chief Market Strategist at Haitong Securities, all of our current problems are due to a severe lack of confidence in central bankers and their policies.

It was also the case that the U.S. data on Friday rather confused investors, leaving it even more difficult to fathom the next move on rates. This was especially so, given the push higher in wages growth. All is set to be revealed by Janet Yellen on Thursday. Perhaps as Marc Ostwald reminded us, it may be that investors are too obsessed by the manufacturing sector, than the ever growing services sector, on both sides of the Atlantic. Perhaps the key factor which market participants have to grapple with over the near term is the impact of Sovereign Wealth Funds being net sellers of assets, especially from emerging markets?

FX: Remember the range

Steven Woodcock, Senior FX Trader at Plutus FX pointed to the extreme uncertainty in the FX markets, although as he reminded us, for many the charts are being helpful in terms of providing insight into potential fresh moves. This is particularly so for Cable, after the spike through $1.46. The overall view from Woodcock was to remember the ranges for the cross, especially the psychological $1.40 and $1.45 levels. He did see the risk of $1.35 being visited, with or without Brexit fears, although only below this zone would really begin to phase experienced traders.

Gold remains one of the highlighted markets at the moment, and Woodcock pointed again to the wake that its post December price action allowed for a decent technical entry towards $1,070 into which traders could have entered and not be stopped out.

M&A Update

On the M&A front Ben Harrington from Betaville noted how on the M&A front things appear to have quietened down a little this week. But not necessarily enough to cool off speculation that there could be a counter bid in the works for Argos owner Home Retail Group (HOME) – even though it has officially said yes to Sainsbury (SBRY). In contrast, Harrington expressed genuine surprise at the Chem China bid for Syngenta – given the size of the deal at $43bn, something that Chinese companies tend not to operate in such size abroad. A Chinese bid for West Ham is also allegedly doing the rounds as a story…