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FTSE falters again as buyers sit on the sidelines

Heading into the close the FTSE 100 is 30 points lower, but US markets have staged a small recovery.

London
Source: Bloomberg
  • Glencore shares continue their bounce
  • Wolseley slumps despite encouraging earnings
  • Nervousness prevails ahead of key US and Chinese data

In Europe, the selling has continued, but at a much slower pace, while in the US a modest bounce is currently underway. For European investors, the focus remains on Glencore and Volkswagen, two names that have dominated headlines in recent sessions. The former has risen 16% today, fulfilling expectations for the traditional ‘dead cat bounce’, with a spirited defence of the firm’s position being made by executives and brokers.

For now, it seems that the rush for the exit has stopped in Glencore, but it is too early to say that a bottom has been reached, especially with the week’s China data still to come.

While Glencore rallies, Wolseley shares have plumbed the depths today, despite a rise in the dividend and a further rise in margins at the company. Despite the firm’s best attempts to play up improvement in the US, investors are now looking forward, taking into account expectations from the Federal Reserve that economic conditions will be more challenging, and reducing their exposure accordingly.

With the Fed still happy to hint at a rise in rates later in the year today’s bounce on Wall Street could struggle to last, particularly as we hit ADP numbers tomorrow as the prelude to non-farms on Friday.

Consumer confidence numbers this afternoon provided a glimmer of light on the US economy, and it seems at least some equity investors are learning to love the idea of a rate hike in the US, if it means that the Fed has become more upbeat about the economy.

Much depends now on Chinese PMI numbers later in the week, especially where the beaten down raw materials sector is concerned.

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