Confirmation in state media of China’s ban on selling for large shareholders helped local markets rise on Wednesday but a surprisingly weak fix for the yuan and a fresh 11-year low for Brent crude oil undermined confidence in European markets. North Korea’s successful test of a nuclear bomb hasn’t helped.
The FTSE 100 slipped back beneath 6100 to Monday’s lows while the German DAX dropped below 10,200.
A report that the selling ban in China would be extended until a new permanent rule replaces it has, for now removed the spectre of a wave of selling as large shareholders cut positions following the Summer rout.
The offshore yuan sank to its lowest since trading began in 2010 and its widest spread to the onshore rate on record after the PBOC lowered Wednesday’s midpoint to below the previous day’s close. The central bank isn’t being shy about its intension to lower the yuan’s value and has probably been encouraged to do so at an even quicker pace after the latest weak manufacturing data. The worry for Europe and the ECB is that China and the PBOC beat them at their own game of currency devaluation to boost exports.
A fresh 11-yr low in front-month Brent crude oil futures to $35 per barrel coupled with a drop in industrial metals is dragging commodity-stocks lower in the FTSE. Shares of Royal were in demand again, topping the UK benchmark following positive broker comments this week.
The British pound traded lower as the UK services PMI saw a slightly bigger fall than expected from the previous month with a reading of 55.5 in December.
US stocks look set for a weak start ahead of what could be hawkish meeting minutes from the FOMC. The S&P 500 is set to fall below the key psychological 2000 level and the Dow Jones below 17,000 to the lowest levels since October.
USA pre-opening levels
S&P 500: 26 points lower at 1,990
Dow Jones: 202 points lower at 16,956
Nasdaq 100: 66 points lower at 4,418
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