Proactive Investors -
- FTSE 100 down 8 points at 8265
- Phoenix Group leads fallers as SunLife sale shelved
- Playtech (LON:PTEC) climbs as profits expected to beat forecasts
Saudi gold buying
More on gold, with the Saudi Arabian Monetary Authority seen now to have been covertly buying up gold.
Data suggests it bought roughly 160 tonnes of gold in Switzerland since early 2022.
Aanalyst Jan Nieuwenhuijs said this on the moneymetals.com site: "It seems that the Saudi central bank has secretly bought 160 tonnes of gold in Switzerland since the beginning of 2022, contributing to the current rise in gold. Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, they could this time become the pivot of its dissolution.”
Commodities comments
Gold prices reached the new all-time high overnight in Asia and have continued higher.
This follows a week that saw prices once again accelerate as the dollar and yields softened and traders entertained the prospect for a 50-basis point cut, say analysts.
Silver and platinum were even bigger winners, rising 10%, which is put down to additional support from a recovering industrial metal sector.
But this week, gold prices are "in for a reality check", says Naeem Aslam at Zaye Capital Markets, noting that traders are expecting a dovish hand from the Fed.
If the Fed cuts the rate by 25 basis points rather than 50bps, "it might be a case of 'close, but no cigar' for gold bulls," Aslam says.
"However, if the Fed cuts the rate by 50 basis points, then we could see some more interest among gold traders, and this means that we may see more upside moves for gold prices."
As for coffee, Saxo’s head of commodity strategy Ole Hansen says: "Just like cocoa, orange juice and recently also sugar, coffee prices have been supported by persistent weather supply disruptions in the key production regions."
Weather in Vietnam for robusta coffee beans and increasingly in Brazil for arabica, he says, leading to production outlook being lowered after heat and lack of rain.
"The worst drought in decades does not bode well for next season’s potential adding further tightness to a market underpinning prices amid worries that higher farmgate prices will not be enough to raise production as weather remains the main problem.
"The cost of your cuppa will likely rise further, although its worth remembering that only a fraction of the final cost is contributed the actual cost of the beans."
Coffee and cigarettes gold
Two commodities of interest this morning: coffee and gold.
I've had a nice mug of one of those this morning and could do with another, but the price of arabica beans has risen to a 13-year high.
Futures contracts for premium arabica beans are up 2pc to $2.64 per pound today, the highest price since 2011, up from below $2.45 a week ago and $2 in April.
This is on the back of drought conditions that have limited production.
Gold, meanwhile, has topped the records set last month, breaching above the $2,585 level per ounce.
Setting the scene for markets
"Holidays in China, Japan and South Korea, and the trifecta of Fed, BoE and BoJ meetings Wednesday through Friday along with a light calendar of data and events will make for a quiet start to a potentially major week for sentiment in financial markets," says Marc Ostwald, chief economist and global strategist at ADM Investor Services.
He also points to "slightly worse than expected" weekend China data and the overnight Rightmove (LON:RMV) data to digest, with little more than Eurozone and Italian trade balance, and the US NY Fed Empire manufacturing survey ahead.
"China's activity data were a little worse than expected, while the property sector data were particularly depressing given that they should be seeing some improvement dur to base effects, which in turn underlines the obvious lack of traction from the various measures to support the property market," says Ostwald.
Looking to later in the week, he says the US FOMC meeting will be the "focal point", with markets still not 100% settled on whether it will be a quarter or half-point cut.
"The decision is very finely balanced, and will hinge on the FOMC balancing concerns that labour market loosening is getting too much momentum, and on the other hand sending a rather negative signal on the economic outlook."
The BoE MPC meeting on Thursday follows inflation data the day before, with CPI expected to be unchanged in headline terms at 2.2%, but more important he reckons will be core and services CPI readings, both seen rising.
"Expectations for no change from the BoE are unanimous, and unsurprising given the anticipated rebound in core inflation measures. It will be interesting to see if there is any reference to prospecive fiscal policy tightening, which would in principle imply the need for easier monetary policy."
The Bank of Japan also meets on Friday, and will "very likely" keep rates unchanged at 0.25%, with a leadership election following next week.
Housing market loosening up a little more
House prices rose 0.8% in the past month to an average of £370,759, according to Rightmove data released overnight.
The months of September usually is positive for house prices, but the researchers note that year’s increase is double the long-term average amidst a rise in activity levels in the market.
Numbers of new sellers are up 14% on a year ago, and the number of agreed sales is up 27%, compared to what was a subdued market last year as homeowners reacted to interest rates no longer being near zero.
However, Rightmove did note some lingering caution, with an average of 60 days for a seller to find a buyer, three days longer than a year ago.
With a key few Bank of England meetings in coming months and next month’s Budget, analyst at AJ Bell (LON:AJBA) said it "could make some prospective buyers think twice about wanting to move house in the near-term".
"Many individuals might be waiting for mortgage rates to come down a lot further, and/or to get clarity over any changes in the Budget that affect their money before committing to a house purchase or sale."
Retailers on the rise
Retailers are leading the Footsie this morning, with the leaderboard topped by Marks and Spencer Group PLC (LON:MKS), with J Sainsbury PLC (LON:SBRY), Associated British Foods PLC (LON:ABF), Tesco PLC (LON:TSCO) and B&M European Value Retail SA not far behind.
For M&S this week brings an update for Ocado (LON:OCDO) Retail, its 50-50 joint venture with Ocado Group PLC. That's on Thursday.
Also helping the index into positive territory are rises for the largest company, AstraZeneca (LON:AZN), plus several others in the top 20, including Unilever (LON:ULVR), Diageo (LON:DGE), Compass and Haleon (LON:HLN), all of which have a consumer angle that could also tap into the same market sentiment as the retailers.
Whatever it is that's driven that is not entirely clear to me yet. (Update: Broker upgrades are behind both M&S and Sainsbury rises, with read across to Tesco and B&M.)
London climbs into the green
London's blue-chip benchmark is now in green, up a mighty three points, while the rest of Europe is mostly in the red.
Germany's DAX is down 0.3%, with Siemens Energy, Infineon Technologies and MTU Aero Engines leading the fallers.
France's CAC 40 has dropped 0.1%, with Capgemini and STMicroelectronics down the most; but Spain's IBEX 35 is up 0.21%, led by clean energy company Acciona, and Italy's FTSE MIB is flat.
The cross-continent STOXX 600 is down 0.1%, with the big faller being Worldline, down another 5% to continue plummeting from Friday as the French payments group's CEO departs on the back of its third profit warning in a year.