FTSE 100 outperforming as construction PMI gains ground

• FTSE 100 outperforms as construction PMI gains ground
• Chinese stocks surge, but wider risks remain
• Australian dollar strengthens after RBA rate pause

The FTSE 100 is out at the front of the pack this morning, with a 6% surge for BP helping the index gain ground despite wider market concerns. We also saw the UK buck the trend seen on mainland Europe this morning, with a welcome rebound in the construction PMI bringing a five-month high of 48.8. The weakness seen for the eurozone construction sector has hindered sentiment in the region, with German stocks struggling for direction despite an unexpected 8.9% surge in December factory orders. The 36.3 construction PMI survey for Germany represents one of the lowest readings on record, with the housing sector and commercial building projects continuing to suffer.

Chinese indices surged on a concerted effort made to halt the slide that took the likes of the Shanghai Composite and Hang Seng into multi-year lows. With announcements from China’s securities regulator, a meeting between President Xi Jinping and financial regulators, and the state fund Central Huijin Investment expanding the breadth of ETF investments, traders have started to dip their toe back in despite ongoing concerns.

The Australian dollar has been clawing back some of its recent losses, following an overnight RBA decision that saw the committee push back against rate cut expectations. While we recently saw fourth quarter inflation slump to 0.6%, the bank continues to remain cautious as uncertainty remains over the timing and pathway back down to 2% inflation. The bank also opted to downgrade its near-term growth forecasts on a weaker consumer spending outlook.