Daily Market Report - 08/01/2016

Nearly GBP 50 billion was wiped off British blue chips on Thursday after China allowed its currency to weaken, rocking global markets and sending commodity shares to their lowest levels in more than a decade. UK mining and energy shares tumbled to their lowest level in more than 11 years, as industrial metal and crude oil prices slumped on concerns that major consumer China's economy is even weaker than anticipated. The commodity-heavy FTSE 100 hit a three-week low, dropping 2.7 percent, wiping 46.6 billion pounds off the index's market capitalisation.

The Chinese central bank weakened the Chinese yuan again on Thursday in a move that is seen as an attempt to stimulate the world's second biggest economy. Investors, unnerved by the global market rout due to fears about the Chinese economy piled into the yen, seen as a safe haven, sending it to the strongest levels against the dollar in over four months. The uncertainty on China led traders to sell the Australian dollar, which is seen as a proxy on Chinese growth, pushing it to its lowest since September versus the US Dollar and the yen.

The People's Bank of China set its official yuan midpoint rate 0.5 percent weaker than Wednesday. That was the biggest daily decline since last August, when Beijing abruptly devalued the yuan by almost 2 percent. Many feel the lower yuan fixing probably signifies greater risks to the Chinese economy than is publicly know, leading to risk-off trades. 

Oil fell to new 12-year lows on Thursday, triggered by fears over Chinese demand and swelling U.S. stockpiles. The global benchmark Brent crude fell as much as 6 percent to nearly $32 a barrel, its lowest level since at least April 2004, as another free fall in the Chinese stock market rattled investors already concerned by the world glut in crude. 

Key Announcements
13:30 - USD: Unemployment Rate last month 5%, expected to remain flat
1330 -USD: Non-Farm Payrolls expected to exceed last month’s increase of 211k new jobs in the month of December