Chinese stocks stabilise after yesterday's sell-off

After a brief but sharp sell-off yesterday Chinese mainland stock indices managed to edge tentatively higher in what has marked an end to a very volatile week of trading. The CSI 300 benchmark index traded within a wide range overnight, dropping back as low as 4665.521 and trading as high as 4924.303 before eventually closing a shade higher as nervous investors struggled with direction after yesterday’s 6.6% plunge in the index. The Shanghai Composite experienced a similar session of wild trading activity as a shifting mood among retail investors saw the index firm around yesterday’s close just above 4600 after losing 6.8% yesterday as it snapped an eight session rally. After brokers moved to tighten margin limits yesterday traders were quick to take short term profits and wind down leveraged positions as liquidity tightened. On any further tightening of controls we could see mainland Chinese stocks give back some of the 40% year-to-date gains on profit taking.

The ECB highlighted fresh concerns regarding Greece sounding the alarm on potential contagion if a deal fails to be reached soon. In true central bank style, saying something without explicitly saying it, policymakers in the twice yearly Financial Stability Review published yesterday stated that “in the absence of a quick agreement on structural implementation needs, the risk of an upward adjustment of the risk premia demanded on vulnerable euro-area sovereigns could materialise.” Specific comments alluded to issues arising from the drawn out negotiating process which has contributed to significant volatility in recent sessions. German ten year bund yields illustrated this renewed risk aversion and flight to safety with yields on a steady downward path throughout May, last at 0.513%. Market participants are hopeful that a deal can be reached in the coming days with the June 5th repayment of €300m to the IMF fast approaching.

It’s a busy day for economic data today with the second reading of US Q1 GDP data as well as Q1 personal consumption statistics while Chicago PMI data and the University of Michigan sentiment index are expected shortly after. Investors will have plenty to keep them engaged and we could see another choppy session for global risk assets as markets take a breather during the last trading session of May, a month which has seen global equity markets post substantial gains amid increased volatility.

The CSI 300 index holds steady after yesterday's losses

SHSZ300 Index Shanghai Shenzhen 2015 05 29 07 31 57

German 10 year bund yields continue to decline on risk aversion

GDBR10 Index Germany Generic Go 2015 05 29 07 42 06

Events for today

0005

UK

Jun

GfK Consumer Confidence

1330

US

Q1

GDP

1330

US

Q1

Personal consumption

1445

US

May

Chicago PMI

1500

US

May

Michigan Survey

LT: 

May Copper, Gold & Silver (COMEX) 

All times UK Local Time

 

Topics: GDP, IMF, Greece, Yields
More from: Kash Kamal