27th Jan 2014 07:36
LONDON (Alliance News) - The global equity sell-off is expected to continue Monday, as investors continue to worry about slow economic growth in China and the outlook for emerging markets as a whole ahead of the US Federal Reserve's January policy meeting.
Wall Street closed firmly lower Friday, while Asian stock indices currently trade lower amid worries about slower economic growth in China. Ahead of the London equity open, the Nikkei is down 2.5%, the Hang Seng index is down 2%, and the Shanghai Composite index is down 1%.
Alongside this, the US Federal Reserve's policy-setting committee meets on Tuesday and Wednesday.
In December, the Fed announced that it would reduce its monthly bond-buying program by USD10 billion every month starting January throughout 2014. Traders are now anxious to see if the Fed will cut its monetary stimulus further.
"With the US Federal Reserve looking increasingly likely it could announce a further USD10 billion tapering of its asset purchase programme this week, it seems quite likely that today?s European market open could well be a pretty volatile affair," says Michael Hewson, chief market analyst at CMC Markets,
In the UK, both IG and CMC Markets indicate the FTSE 100 to open significantly lower at approximately 6,578 points, down from 6,663.74 at the close Friday.
However, "the extent of Friday?s stock market falls would also seem to suggest that there could be further declines in the coming days and weeks, which would be somewhat ironic given that we are now seeing some significant improvements in a lot of the economic data not only coming out of the US, and the UK but also, Europe as well," says Hewson.
In the data calendar Monday, German IFO data is released at 0900 GMT. "German IFO survey is likely to confirm the message of last week's 'flash' PMI data, that the German manufacturing sector continued to expand in January," says Rhys Herbert, senior international macroeconomist at Lloyds Bank.
"While the IFO and PMI do not always exactly follow each other, the correlation is sufficiently close for us to forecast another decent rise in the IFO," he adds.
In the US, Markit Economics releases its preliminary services PMI reading at 1358 GMT. US new homes sales data is scheduled for 1500 GMT, ahead of the Dallas Federal Reserves manufacturing business index at 1530 GMT.
In corporate news, blue-chip Aviva has released an interim management statement. Also in the FTSE 100, ARM Holdings has announced that John Buchanan is stepping down as chairman, at his request, owing to medical condition. The board has named Stuart Chambers as chairman designate.
By James Kemp; [email protected]; @jamespkemp
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