Sell-off in Europe likely today

A sell-off is expected on European bourses this morning, following a weakening in US markets on Friday from the highs reached after the strong US jobs data.

In out-of-hours trading, GFT is forecasting the UK index to open down 66 points from last week’s close, at around 5,910. The German DAX is quoted to open down 70 points at 7,422 and the French CAC is called down 45 points at 4,013.

Although closing up over 50 points, the Dow Jones blue chip index still managed to drop over 100 points after European cash stock markets closed on Friday, following a slip in oil prices. The energy sector had led the US indices higher earlier in the session after the surprisingly good employment figures, but then the great commodities rout which dominated the financial landscape last week resumed. WTI light crude closed at $97.18 a barrel – a near 15 per cent slump on the week, its largest such decline since trading began on NYMEX.

Commodity markets will inevitably continue to command centre-stage attention once again today. One of the several triggers for the correction which began last week was anxiety amongst traders that China was facing a slowdown, following a series of initiatives to tighten liquidity in an attempt to tackle stubbornly high inflation. The third round of the China/US strategic and economic dialogue begins today. Later in the week, key Chinese economic data includes retail sales and industrial production – plus the all-important consumer inflation data – are all due on Wednesday.

Economic data also due out from the US includes retail sales, producer and consumer inflation and consumer confidence.

Just as important these days as scheduled major economic data releases are the impromptu margin change notices from the CME, where we need to keep a close eye on any further changes, as multiple recent hikes in the deposit requirement levels of its silver future contract were arguably another of the triggers for the correction.

Martin Slaney is director of GFT’s global dealing operations