Markets frantic as China selloff continues

7 January,, Lagos –The day has already commenced with considerably volatility as global markets react to the China selloff. The Chinese stock market was again suspended for about 15 minutes, just 29 minutes after the market open as the CSI 300 stock index fell by 5%, extending this year’s decline to 12% already. As soon as the markets reopened for activity, the index fell to 7%, hence activating circuit breakers to halt market activity. This is already setting up to be one of the most intriguing events of the year, similar to the Swiss National Bank’s decision to scrap the Euro/Swiss Franc floor last year.

The China selloff in stocks was sparked by the central bank’s decision to cut its Yuan reference rate by the most since August. Interestingly, Gold is up, the US dollar is mixed, Australian dollar is down, while crude oil continues sharply down for the third straight day.

On the fundamental calendar for the day, key releases from Australia has contributed to the continued fall of the currency in early trading hours. We also have vital reports from the US and Canada’s Governor Poloz is due to speak latter in the day.

Australia Trade balance

The difference in value between imported and exported goods and services during the reported month was a deficit of 2.93B, almost inline with forecast. However, the building approvals m/m showed that the number of dwellings approved fell 1.9 per cent in November 2015, in trend terms, and has fallen for eight consecutive months, according to the Australian Bureau of Statistics report. The figure was -12.7%, therefore weighting further on the already weakened Aussie.

US unemployment claims

The unemployment claims is expected to impress, considering the recent trend in the report. It is forecast to show 271k individuals filed for unemployment insurance for the first time during the past week. The ADP non-farm payroll report impressed, as it sharply beat forecast to show that the US private sector created a lot more jobs than expected in the final month of the 2015. The US private sector added 257,000 net new positions during the final month of the year – the highest since June 2014 – ADP said, compared to the downwardly revised 211,000 jobs added in October. On aggregate, the dollar has been strong in the past few days, however, the momentum on this strength seems to be fading. We will therefore be looking towards reaction to key data like the non-farm payroll report tomorrow for a clearer trend picture.

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