First day of 2019 trading opens with big sell off

The FTSE opened down this morning and is still trading in the red to the tune of 1.81% with most of the big miners down by more than 3%.

Negative China data pushes stocks down, gold up

It’s the first day back at the office for many big traders and fund managers and this will mean higher volumes and a re-positioning of portfolios, leading to some potential big swings in asset prices. The sell off in the London market followed on from selling overnight in Hong Kong, with the Hang Seng Index closing down 2.9% while China’s CSI coughed up 1.4%.

Much of the initial negative sentiment seems to be emerging from China: a Shanghai market close that sees it trading at March 2016 valuations is one issue, but this has been compounded by the release of the Caixin-Markit manufacturing purchasing managers’ index which has dropped below the crucial 50 point indicator, to demonstrate contraction in this sector for China.

While the trade war with the United States last year has played a role in putting the brakes on Chinese manufacturing there were already systemic signals that the country’s economy was starting to slow down before Trump’s election.

China’s growth has been a huge factor in the overall global economic growth story and its influence as a source of investment, credit and cheap manufacturing has been felt everywhere in the last 10 years. These numbers will be making investors nervous. Traders will be starting to watch to the gold price, which is trading at a six month high at $1285 and is a key indicator of the real fear in the global market.

US shutdown continues, Democrats plan workaround

We saw some big swings in the US market going into the festive period which grabbed headlines, but these were to be expected due to the thinner volumes in US equity markets. The rest of this week will be a better gauge of US investor sentiment. S&P and DJIA futures were indicative of a negative opening number on Wall Street today. Bear in mind the US government is still in a partial shutdown situation this morning – President Trump has invited Congressional leaders to the White House for discussions on the stand off today as the newly-energised Democrats, now in control of the House, table their own workaround legislation.

The GBP was down slightly against the EUR this morning at 1.1096, and is also losing some ground to the USD at 1.27.