China concerns dampen global sentiment

Global Markets

Reoccurring concerns over the global economy and the most recent developments in emerging market weakness has been a key factor in encouraging the Organization for Economic Cooperation and Development (OECD) to downwardly revise 2015 global forecasts to 2.9%. This has contributed to downward pressures on global markets, to which the recent weak economic data from China has weighed further on market sentiment. Sentiment towards the global economy has received another jab following the weak data from China over the past two days, including another astonishing decline in China imports at 19% and a weaker than expected inflation reading. Falling inflation provides further scope for the People’s Bank of China (PBoC) to unleash further monetary stimulus and expectations remain high that the PBoC will ease policy further.

Lower commodity prices have dragged down inflation prospects in China, while its own economic slowdown has weighed heavily on the commodity markets due to the economy not importing anywhere near as heavily as it has done in the past. Overall, the recent string of soft economic data will continue to reinforce anxieties market participants have about the China economy, which will impact on those economies that have become reliant on trade from China.

The anxieties over slowing growth in China have had an impact on Asian equities today, with most major Asian markets venturing back into red territory. Both European and American equities are also suffering losses, which aside from China can also be correlated to a sense of nervousness around whether the Federal Reserve will raise US interest rates next month. If the recent weakness in the emerging markets continues to escalate into wider fears over the global economy and the China concerns remain elevated, equity markets can remain under pressure.

Whilst an air of anxiety lingers around the equity markets, this has not encouraged any gains in Gold. The metal has been sold off heavily on the renewed optimism that the Federal Reserve could begin raising US interest rates next month and unless this changes, Gold is looking vulnerable to further pressure. Gold declined over eight consecutive days last week and now that prices have fallen below 1100.00 support and its appeal to investors is waning, there may be potential for a further decline towards the 1080 level.

USDCAD

The bolstered prospects of a December US rate hike has instilled USD bulls with upwards momentum. The USDCAD is technically bullish on the daily timeframe, and as long as prices can keep above the 1.3050 support, there may be an incline to the 1.3450 level.

GBPAUD

The Sterling has been left weakened following the BoE’s dovish tone on the UK economy. The GBPAUD is currently in a tug of war because both the GBP and AUD are somewhat weak. Technically this pair slowly turns technically bullish. A breakout above 2.1700 may open a path to 2.2100.

EURAUD

The EURAUD is technically bearish on the daily timeframe. A breakdown below the 1.5150 support may open a path for a decline back down to the 1.4750 level. Prices are trading below the daily 20 SMA and the MACD had crossed to the downside.

EURJPY

The increasing expectations that the ECB may further QE in the future may enforce downwards pressures on the EUR. The EURJPY is technically bearish on the daily timeframe and the next relevant support is based at 130.50.