FTSE 100 recovers from early thrashing

Another 100-point swing on the FTSE 100 Tuesday should not surprise investors; there have been 11 of them in the first 17 trading sessions of 2016. Drivers remain the same, too - China and oil - although predicting which way markets will go next is no easier.

Clearly, the euphoria surrounding European Central Bank head Mario Draghi's promise last week of more stimulus faded fast. A sharp 106-point drop Tuesday morning took the FTSE 100 to 5,771 and levels last seen late Thursday.

With no data out of China, oil is, once again, the catalyst. A 2.5% drop in early UK trade torpedoed oil majors Royal Dutch Shell and BP, again. Iraqi production being at record levels - and tipped to keep rising - continues to upset the sector. Russia has the taps on full-blast, too.

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Another plunge in Chinese shares also caused palpitations. This morning, the Shanghai Composite index ended down 6% at 2,749, below the August low of 2,850, just as chartist and Interactive Investor contributor John Burford predicted here weeks ago.

Traders remain sceptical about Kingfisher's ambitious five-year restructuring plan. Few expect the B&Q-owner will manage to find the £500 million of extra annual profit it predicts by 2021. Factoring in a cash cost of £800 million, analysts have slashed earnings estimates, and the share price is now down over 10% since Monday morning.

About turn - FTSE fights back

Predictably, miners also took a wallop first thing, with BHP Billiton and Rio Tinto nursing hefty losses. But a fight back began within half an hour of the open, and it was all about oil.

After falling below $29.40 a barrel, Brent crude had climbed steadily to $30.78 by mid-morning, up around 5% from its worst of the day. Over the same timeframe, the FTSE 100 reclaimed 78 points, or 1.4% from its low.

Currently, the blue-chip index is still down 25 points, but there is some relief for mining fans, with Anglo American up 7%, Glencore 5% and Fresnillo 3%. Royal Bank of Scotland and Lloyds Banking attracted buying interest at these levels, too.

And, if technical analyst Alistair Strang is right, there could be a full recovery at some point this afternoon. "Anything now above 5,850 should bring the FTSE to 5,895 sometime later today," he told us just before midday.

"Unfortunately, currently FTSE Futures need to better 5,930 to signal that a bottom is 'in' and, as a result, any rise is liable to fall short."

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