The Day So Far

Equities continuing to tumble this morning despite a calmer session for the Chinese markets, where the Shanghai Composite recovered from some heavy selling early on to close the day almost flat. There are several catalysts for this early January weakness; firstly, the Yen broke aggressively higher against the dollar as investors bid up the ultimate safe haven currency. This led to correlated selling in equities; traders should continue to monitor that currency pair for signs of risk-on/risk-off moves developing. The other major asset to watch is crude, as the positive correlation with crude and equities remains intact. WTI crude finally lost the battle with the $38 handle, closing the day below $37 as the commodity struggles for direction at the start of the year. With the supply/ demand picture unlikely to shift in a major way in the near future, look to geopolitics to set the tone for crude in the short term as tensions between Saudi Arabia and Iran escalate. Following a bounce through to the US session close, equities are once again firmly on the back foot with the Dax breaking below yesterday’s lows and the S&P trading below 2000. We anticipate further weakness across the board in the session ahead.


The Afternoon View

Having kicked off the month with a feast of macro data yesterday, today is a relative famine with solely the ISM New York on the slate at 14:45 GMT. Yesterday’s ISM Manufacturing and construction output didn’t bode well for US Q1 GDP growth as the world’s largest economy looks to bounce back from a sluggish finish to last year, and already the Atlanta Fed, who produce the most closely-followed GDP forecasts, reduced their Q1 US GDP estimates from 1.1% to 0.70% after the release. We are sticking with our bearish bias in equities, they look very vulnerable to further downside. Even though the fundamental picture hasn’t materially changed since the close of 2015, evidently sentiment has. The dollar has also dominated against sterling and the euro, with cable particularly weak as several research houses suggesting the BoE will not mimic the Fed in raising rates until at least the end of 2016.Cable now trades at the lowest level since April last year and looks odds on to test the 2015 lows in the days ahead.

Amplify Trading is a Limited company registered in England and Wales. Registered number 6798566. Registered address: 50 Bank Street, 3rd Floor, Canary Wharf, London, E24 5NS. Information or opinions provided by us should not be used for investment advice and do not constitute an offer to sell or solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. When making a decision about your investments, you should seek the advice of a professional financial adviser.

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