Oil and China Drag on Stocks

Market Trends - 26/01/2016

European stocks are back to trading lower after having rallied from the official speech given by ECB officials last Thursday. Central Bank Governor Mario Draghi stated in particular that the Bank is willing to act as much as necessary to fulfill its inflation mandate. As the Chinese economy  slows down and oil prices continue to plummet, the official statement illustrated the economy’s need for further stimulus with taller limits, and that the Central Bank is willing to deploy these measures as soon as their next meeting on March 10th. As the ECB President opened the door for further intervention, European stocks reversed their downward trend. The German DAX, after reaching recent lows of 9254.00 climbed gradually up to 9838.50, with the French CAC climbing to 4360.50 alongside it. The upbeat motion echoed to US stocks as well as commodities, especially after crude prices reached above $32 a barrel in lieu of lows beyond $28.


The highs were not long lived however, as oil prices began to dip on Monday mornings’ trading session after announcements of planned output and production by the Oil Ministry of Iraq, and also on statements from Saudi Aramco Chairman Khalid al-Falih on maintaining investments in oil and natural gas. Tuesday’s equity session had European stocks open at even lower prices as the Chinese market tumbled once again, with the Shanghai Composite Index dropping -6.40% while crude prices slipped to below $30 a barrel. The DAX 30, after closing at 9671.75 on Monday, opened at 9586.75 and fell as low as 9563.00 while the CAC 40 opened at 4227.50 after closing at 4270.50 on Monday.. Even as the People’s Bank of China injects $67 billion from the start of the year in order to overcome the slump, Chinese stocks continue to plunge and affect global markets. The PBOC will cut its 17.50% required reserve ration gradually over the year down to 15.50% in order to catalyze the Chinese economy.

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