Yet again we made lower lows for the S&P 500 yesterday, even establishing a new year to date low. We have subsequently seen a bounce which constitutes a 2% rally from said lows. We would need to climb another 1.5% in order for the increasingly negative bias of the market not to be concerning, but on the flip side the mid December lows below 1970 represent huge levels now. We really don’t want to see the index go below there. As before the selling seems to occur when US traders get in to work – an interesting dynamic, and one we will monitor today to see if it persists.

On a more positive note, commodities, namely copper and oil had positive days with recovers of some sort occurring. Difficult to tell if these are just counter-trend rallies or if the worst is over. The way things are going, I’m inclined toward the former. Time will tell. For what it’s worth the selling of copper was out of China, supposedly on the back of Chinese hedge funds taking a gloomy view on the economic outlook, and that’s not the only sobering news coming out of Asia, where we have seen the South Korean central slash their growth forecast because of deflation fears, and in Japan core machinery orders data (a leading indicator for capex spending) fell 14.6% year on year worse than the forecast 5.8% decline…. woof! Just focussing on South Korea, those deflation fears are because the economy is a major importer of energy, I wish someone could explain to me in what world cheaper energy imports for an energy consuming economy can be read in as a bad thing, but there you go.. this is the world we live in now. Anyway, add those gloomy views on 2015 growth prospects to the World Bank’s slower growth forecast, and it seems many see a half empty glass for the coming year. Perhaps the Indians are on my side… they’ve surprised the market by lowering their benchmark interest rate because inflation is declining, with a view to boosting growth. The currency markets loved it.. the Indian rupee has appreciated by 1% today. Who can blame them? Lower borrowing costs plus cheaper energy. Nice!

Meanwhile the euro looks like the sick man amongst the major currencies, this becomes even more apparent when you look at how EUR/GBP has performed recently. The cross is at the lowest level since mid-2013, and looks set to challenge levels last seen in 2009. Some of the likely causes of this weakness are:

• a legal challenge to Eurozone QE has failed in the courts;
• ECB council member Christian Noyer has suggested that euro depreciation is “normal” given the weak growth in the Eurozone;
• and the outcome of the Greek elections looms over the markets.

There are likely other reasons, but these three are fairly juicy and support the precarious state of the euro. German GDP came in at 1.5% annual growth for 2014. Not bad.. particularly considering it barely grew the year before. And now we look forward to the boost from collapsing energy prices. Not too shabby…

But in further signs of slowing (in a purely relative sense) in the Chinese economy, credit growth has been much less than expected, with new loans coming in considerably below forecasts. That’s despite instructions from the central bank near the end of last year to turn on the taps. Very very interesting!

Not a huge amount of data to look forward to today. Empire State Manufacturing data in the US this afternoon, as well as some consumer confidence data. We’ll tweet if anything really interesting happens. I have my eye on the Russian rouble, it’s down over 2% today… oh deary me!

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