Poor economic data out of China overnight helped set the tone for today’s European trading session as the weaponised trade tariffs start to impact the Chinese economy. European and UK markets were soft today with negatives across the board and all UK indices down between 0.2 and 0.4%. Selling was muted with relatively low volume and a rally into the close from intraday lows. The techMark did drop by almost 0.5% today which may be signalling more weakness to come in the other indices: this has had a tendency to lead the charge in either direction over the past couple of years. While the FTSE 100 remains bullish and inversely correlated to GBP, the AIM All-Share and FTSE 250 are relatively bearish and look prone to further selling. As we head into quieter summer months, there may well be increased volatility as liquidity dries up.
Kier gave a gave a stunning example of the dangers of bottom fishing: having rallied over 20% this week from all-time lows, the beleaguered Construction and Services Company dropped over 35% today on news of the sale of its housebuilding division. It closed at prices not seen since the ‘90s on a record high daily volume: an ominous sign particularly given the level of short interest at over 6%.
GBP dropped sharply today down over 0.6% and the $1.26 level. Meanwhile Brent continued to rally today maintaining a level above $62 and providing evidence of support at the $60 level. In other commodities, the effect of a China slowdown played out in metal prices with copper down 1%, iron ore 2% while gold caught a bid despite a stronger dollar.
Market sentiment echoes the sanguine disposition of market participants: the US VIX dropped almost 25% to below 16 while the UK VIX remains low around 10 and the European VIX similarly dropped over 25% to the 14 level. These are historically very low levels and almost suggest a degree of apathy in the market which can often be caught off guard.