Mining sector holds FTSE back

Heading into the close the FTSE 100 is down 14 points, at 6736, as the miners lead the market lower. 

Mining machinery
Source: Bloomberg

Petrofac shares down 25%

In London, the mining sector giveth and taketh away. Friday’s surge was fuelled by the natural resources companies and now the sector is holding the FTSE 100 back, in comparison with its continental counterparts. Traders quickly cashed in their chips on the back of the Chinese interest rate cut, and now the city is wondering if one rate reduction is too little too late for Beijing to hit its annual growth target.

Petrofac is still feeling the pain after it announced a profit warning this morning — shares in the oil services company are down 25%. The dramatic drop in the price of oil is separating the men from the boys in the oil industry, and I suspect more profit warnings will come out of the woodwork.

Shares in Aviva are off 4% after the insurer made a bid for RSL-UK. The shareholders in Aviva are telling the company the two companies should just remain acquaintances.

BT Group has changed its tune as it is mulling over buying O2 back from Telephonic. The British communications company is looking to move into the mobile business to add to its wireless and fixed-line divisions. 

Dow up 15 points

In the US, the Dow Jones is up 15 points at 17,825. The run up to Thanksgiving is traditionally a strong week for US equities and traders are unlikely to be cashing in their long positions this side of the US holiday. Retailers will be in fashion this week, as Black Friday kicks off the spending season.

It was a double drop from the US services sector, as the PMI report showed a decrease in November from October's reading, which was revised lower. A slip in the service industry could keep interest rates low for a ‘considerable time’. 

Copper could be on the rise

Gold is making yet another attempt on $1200. This level has proved to be a stumbling block for the metal recently as a strong US dollar, and an even stronger equity market, has removed the appeal for the precious metal. The drought in volatility has robbed gold of its flight to quality factor.

Copper is still creeping higher after the surprise interest rate cut from China on Friday; the red metal is making the most of the upward move as China is the number one importer of the metal. Meanwhile, oil can’t seem to hold onto any gains. The OPEC meeting on Thursday will be the talk of the town, and there have been some whispers that Iran want to restrict supply but this is likely to be staunchly resisted by Saudi Arabia.  

Lack of economic announcements sees sterling stuggle

The euro is enjoying a rally as the better-than-expected Ifo figures from Germany gave the troubled currency a much needed helping hand. The single currency is making up for lost ground after Mario Draghi spent much of last week talking the currency down. We are over a week away from the European Central Bank rate decision and press conference, and while I doubt Mr Draghi will pull the trigger on quantitative easing next week, he definitely will allude to it.

Sterling has been trading sideways throughout the session. A lack of economic announcements from the UK has left the pound stuck within a tight range. The Bank of England’s inflation report tomorrow should spark interest in the pound, especially since inflation unexpectedly ticked higher in October. 

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.