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FTSE 100 slides on both soft Caixin PMI Mfg. and on the CSI 300

FTSE 100 slides on both soft Caixin PMI Mfg. and on the CSI 300

2016-01-04 09:08:00
Alejandro Zambrano, Market Analyst
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  • FTSE 100 slides abruptly as China Caixin PMI Manufacturing for Dec. prints 48.2 vs. a Bloomberg survey projecting an outcome of 48.9. Official China PMI Mfg. printed 49.7 vs. the 49.8 expected.
  • U.S. ISM Manufacturing and Markit PMI on tap this afternoon, and an economist poll projects an outcome of 49 and 51.1 respectively.

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The FTSE 100 drops at the open as it adjusts to Asian stock markets turning sour overnight. The China CSI 300 index ended its day lower by 7% as the China Caixin PMI Manufacturing for December printed 48.2 vs. a 48.9 expected (Bloomberg news survey). The official PMI Mfg. was also lower than expected, printing 49.7 vs. the 49.8 expected.

Given the presence of a new circuit breaker system in place for the China CSI 300 index, trading was halted for the rest of the day when the decline reached minus 7%. With the CSI 300 now looking to have resumed its downward trend of 2015, this may weigh on the FTSE 100.

Technical Outlook

The FTSE 100 is down by approx. 2 percent at the time of this publication and the slide should slow down given the already strong decline. If today’s U.S. ISM report manages to beat the 49 expected, the FTSE may recuperate part of its losses, while a soft reading may force the FTSE 100 to close near its lows.

The overall trend is bullish above 5995 and with this in mind it would not be surprising if a new low is formed in the 6000 to 6135 region. A break to the 5995 turns the FTSE 100 neutral to bearish.

ISM Manufacturing and Markit PMI on Tap

Key data on tap in today’s session is final Markit Mfg. PMI, which is expected to decline to 51.1 from 51.3 and ISM Manufacturing, which is expected to rise to 49 from 48.6 in November. PMI data for the U.K. is also on tap, but the FTSE 100 tends not to react to it too much as FTSE 100 firms primarily source their income abroad.

Today's most important economic indicator for the market should be ISM Manufacturing. The November reading was 48.6 which highlights a contraction of the U.S. manufacturing sector. If this is allowed to continue, the U.S. economy may end up in a recession and the stock may fall a great deal further. Today’s reading is therefore key for the long-term health of the FTSE 100.

FTSE 100 / UK100

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

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