UK & Europe
Weakness in commodity prices and Volkswagen’s emission scandal has weighed on already timorous European stock markets. Every jump or slump in the market is being used by jittery investors to reposition portfolios at the end of the quarter.
Glencore (LONDON:GLEN) shares crashed a breathtaking 27% for the biggest drop on record. A broker note suggested commodity prices at current levels would mean all Glencore equity could be lost against its hefty debt pile. Panic hitting Glencore shares has hit the rest of the mining space with Anglo American (LONDON:AAL) down nearly 10% and BHP Billiton (LONDON:BLT) down over 6%.
Shares of Royal Dutch Shell (LONDON:RDSa) were in the red, hovering close to six year lows after an exploration project in the Alaska came up dry.
Shares of VW, BMW and Peugeot well all dropping gain on Monday. The emissions scandal is starting to look like a real albatross around the neck of the automotive sector. The choice of Matthias Mueller as new VW chief is a positive first step to address the emissions scandal but the concern is that the selection of the Porsche CEO is too insular and won’t provide the kind of culture change needed.
Tesco’s planned sale of its Poland, Hungary and Slovakia operations was not enough to undo concern that Aldi will further erode the market share of the top four supermarkets with its intended entry into UK online shopping.
Shares of SAB Miller were atop the FTSE 100 with gains of as much as 3% on rumours AB InBev may be about to make its takeover offer but gave back some gains when the bid wasn’t forthcoming.
US
Stocks in the US opened lower amidst concerns over global growth pushing commodity prices lower and fear of a government shutdown that could weigh on growth domestically were it to happen.
Over 13 million sales of the new iPhone weren’t even enough to help Apple shares (NASDAQ:AAPL) which slumped over 1%.
FX
The dollar was mostly higher on Monday after consumer confidence rose in September and Federal Reserve board member William Dudley hinted at a US rate hike as early as October.
M&A flows from the prospective AB Inbev – SAB Miller deal as well as a renewed faith in a Bank of England rate hike helped the British pound gain against most major currencies. GBP/USD was essentially flat just beneath 1.52 around 4 ½ month lows.
The ECB’s Lautenschlager supported the euro after suggesting it was too early to talk of expanding quantitative easing in the Eurozone. EUR/USD was flat just under 1.12.
The Japanese yen was bid in a flight to safety as global stock markets came down including the Nikkei which lost 1.3%.
Commodities
There was an element of the tail wagging the dog today when steep falls in mining stocks prompted a drop in the commodities the companies mine. The 25% slide in Glencore’s stock caused panic across the mining complex and fuelled an over 1% drop in copper prices.
Fed board members including the more dovish William Dudley talking up a US rate rise as early as October reduced demand for non-yielding assets, sending gold lower by over 1% and silver down over 3%.
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