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The FTSE 100 might well have fallen by 230 points since the beginning of the month, but that has so far proven not to be enough of an enticement to tempt 'buy on dip' traders back into the game.
December has historically proven to be fruitful for FTSE investors but unless we see a swift turnaround in sentiment, last year’s selloff might not be the anomaly that traders thought. Overnight inflation figures from China are a welcome distraction from the negativity Chinese data has had to offer of late, as they are better than expected and up two-tenths of a percent from last month.
Once again the mining sector is dragging the FTSE lower, although not with the aggression seen yesterday.
Worries that Anglo American’s actions yesterday might become the template for others in that sector have seen investors running for the exits, as a second day of double-digit falls hit. Cost-cutting and asset stripping have already been exhausted and, as unattractive as it might be, trimming or suspending dividends might be the course of action that others have to follow.
Yesterday saw both US Light and Brent crude trade below $40, hitting multi-year lows. With no sign of an improvement in underlying demand and the continuation of the OPEC-driven oversupply, these could be levels that oil traders need to get used to.
On a more optimistic note, Ashtead has posted first-half pre-tax profits up 29% and confirmed that full-year figures should come in ahead of expectations.
As a leading lender of industrial and commercial equipment, this is an encouraging sign for the US economy even though these figures have been boosted by the percentage of US dollar revenue they create.
Ahead of the open we expect the Dow Jones to start 58 points lower, at 17,510.