European equities rebound strongly despite extensive selloff in China

Tuesday, August 25, 2015

Global equity markets retreated heavily yesterday as Chinese stocks suffered their worst day in eight years. The strong sell-off of the Chinese equity markets triggered further heavy declines across the US and European equity markets, with the London equity benchmark index falling below the psychological level of 6,000 for the first time in two years. In Asian trading this morning, the picture remains fairly mixed. The Hang Seng index managed to reverse and posted solid gains after rising 0.72% above 21,400. However, the Shanghai Composite index and the Nikkei index extended losses by 7.63% and 3.96%, respectively, as Chinese growth concerns continued to weigh on market sentiment.

This morning, European markets rebounded and posted strong gains in early trade. The CAC, DAX, IBEX and London equity benchmark indices reversed yesterday’s losses and rallied higher between 2.4% and 3%. The big surprise yesterday was the European currency as the EUR rallied strongly and hit a high at 1.1714 to finish the session at 1.1620. This morning, the EUR gave back part of earlier gains and hovered around 1.1550 against the USD. The German economy grew by 0.4% in Q2 2015, in line with expectations, while German exports climbed higher by 2.2% versus estimates of a 1.8% rise and imports increased 0.8% in Q2 2015. Furthermore, the IFO Business climate index was very optimistic for the German economy after showing improving market conditions for August.  

DAX Index rebounds towards 10,000

DAX Index (Deutsche Boerse AG Ge 2015-08-25 09-50-28

Market participants will be keeping an eye on the release of the US FHFA House Price index, New Home Sales data as well as Markit Composite and Services PMI and consumer confidence index for further direction. Thus, it is a very busy day on the macroeconomic front, while the USD index has been trading around 93.60 against a basket of currencies. The release of key US macroeconomic will set the tone for today’s trading activity during the US session.  

We received fairly optimistic signs in this morning’s European trading session, as most European equities reversed and climbed higher. Crude oil prices rebounded from a 6 ½ year low and rallied over 2% this morning with the WTI front month futures trading around $39/barrel.  

 

Events for today:

0700

DE

Q2

GDP (Final)

0900

DE

Aug

IFO - Business Climate

1400

US

Jun

FHFA House Price Index

1500

US

Jul

New Homes Sales

1500

US

Aug

Consumer Confidence

1500

US

Aug

Richmond Fed Mfg Index

All times UK Local Time

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