Europe
Having come off the back of eight consecutive days of gains the FTSE100 has slipped back today as investors decided to take the opportunity to lock in gains in stocks that have seen a significant rebound in recent days.
Amongst the biggest gainers over the past few days mining stocks have rebounded strongly with Rio Tinto (L:RIO) up over 15% since the beginning of the month and Glencore (L:GLEN) up 30% as copper and oil prices rebounded strongly, on production cuts and expectations of lower output in the coming weeks.
Against that backdrop, ahead of the latest September Chinese trade data early tomorrow morning, it is perhaps not too surprising that we’ve seen the mining sector lead today’s losses as investors lock in the gains of the last few days in the event of another nasty Shanghai surprise.
Amongst the biggest decliners today investors appear unimpressed by Glencore’s latest measures to shore up its balance sheet, in addition to last week’s cuts to mining and zinc production. Its plans to offload a couple of its copper assets in Australia and Chile appear to be the latest in a series of attempts to reassure investors that it is making serious attempts to underpin the business against further commodity price weakness. This drip feeding of additional measures is now starting to come across as somewhat piecemeal, and given the current price of copper, the price Glencore is likely to get won’t make much difference in the overall scheme of things.
Also trading lower Anglo American (L:AAL) and Antofagasta (L:ANTO) shares have given up some ground after some strong gains last week.
Rolls Royce (L:RR) shares are also taking a beating on reports that EU regulators could well start looking into the servicing contracts that component manufacturers have with airlines.
Despite announcing further cost cutting measures at the end of last week Standard Chartered (L:STAN) shares are also on the slide after a broker downgrade from Investec brought the recent 25% rebound in the share price to a shuddering halt.
An increased bid of £43.50 per share from AB InBev for SABMiller (L:SAB) doesn’t appear to have inspired much investor confidence that we will see an agreement by the Wednesday cut-off date if today’s share price reaction is any guide, as investors give the new offer a big meh.
US
While US bond markets remain closed for the Columbus Day holiday US equity markets opened slightly higher before slipping back a touch with pharmaceutical giant Eli Lilly and Company (N:LLY) getting clobbered after announcing the suspension of phase 3 trials of its heart drug evacetrapib due to concerns about its effectiveness.
With little in the way of external drivers ahead of the start of a slew of major earnings announcements the main focus has been on a number of Fed speakers through the rest of the day. Fed policymakers appear keen to keep the prospect of an October rate hike on the table even if most market participants refuse to reflect that belief.
Comments from the Atlanta Fed President Dennis Lockhart continue to reinforce the ambiguity about the Fed’s intentions as he reinforces concerns about the lack of inflation while at the same time saying that he would be prepared to consider hiking without any evidence of upward price pressure.
With Chicago Fed President Charles Evans also due to speak it is no secret that he will probably be dovish, having already stated he would prefer to wait until next year to raise rates, while Lael Brainard’s comments as a permanent member could also be instructive.
FX
Commodity currencies have continued their recent rebounds with New Zealand and Australian dollar finding support from the recent rebound in commodity prices and expectations that the Fed will be forced to delay a prospective rate rise. Firmer gold and copper prices have helped the Australian dollar in particular rally nearly 5% in the last week. With Chinese data due out later this week expectations of further stimulus measures are also helping the commodity space.
The pound has also held steady ahead of some key economic data later this week with inflation data set to point to continued price stagnation while wages data is set to point to a further widening of the gap between prices and wages in favour of the UK consumer.
Commodities
Oil prices have slipped back after the gains of last weeks failed to push prices through some key technical resistance levels. The fact that OPEC announced in its latest numbers that output climbed to a three year high in September, probably also helped at the margins as concerns about oversupply returned in the short term overshadowing all of last week’s talk of a longer term slowdown in US productivity.
Gold prices have continued their recent upward momentum taking the yellow metal close to its highest levels in seven weeks as a weaker US dollar and some seasonal demand helps underpin prices.
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