It has been another tentative early start in UK and mainland European shares on Monday, with some solace to be had from a higher market close in China but significant concerns surrounding oil prices hitting fresh multi-year lows.
Markets are now in do-or-die territory. We’re now sitting just above the August lows; a line in the sand for many investors. Just another 2-3% drop from here could trigger enough position covering and protective options orders that move markets from correction to bear market.
Oil prices have rebounded from levels last seen in 2003 for Brent crude reached during the Asian session. The lifting of Iran sanctions over the weekend has happened a little sooner than many thought and plays right into the market’s worry over the country’s political stand-off with regional rival and OPEC partner Saudi Arabia.
The imposition of a reserve ratio for offshore banks operating in China has helped ease the downward pressure on the yuan and helped Chinese stocks bounce from bear market territory.
The more defensive and currently merger-ridden healthcare sector is best-performing on the FTSE 100 as Shire PLC (L:SHP) tops the index after sealing the deal with US rival Baxalta Inc (N:BXLT). After generally weak results from US banking peers last week, UK-listed banks HSBC (L:HSBA) and Barclays (L:BARC) were underperformers with continually weak FICC trading revenues are expected to weigh on results across the sector this week.
US stocks are closed for Martin Luther King Jr Day.
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