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Commodity stocks climb

The head of the Chinese central banks stated it has more tools available should it feel necessary to do so.

Mining site
Source: Bloomberg

The head of the PBoC announced that he has easing tools at his disposal and is willing to use them should he see fit. A large portion of sell-offs in 2016 were down to fear surrounding China, and any company connected to the country was hit hard. The suggestion that more monetary easing is potentially on its way has given traders the perfect excuse to acquire relatively cheap commodity stocks.

In London, listed mining and oil and gas companies are in high demand today and the banking sector is also in good health as Asian-focused HSBC and Standard Chartered are helped along by the PBoC’s comments.

While the FTSE is above 6033, its outlook will be positive and 6128 is the next big resistance level in sight. The DAX is also driving higher and bulls are looking towards 9623.

Sterling is set for its worst week since 2009. GBP/USD has recouped some of the losses it has endured lately but while it remains below $1.40 its outlook will be bearish. The Brexit fear is dominating the market and the longer-term trend is to the downside. Selling into strength has been a popular tactic by traders. Rallies will run into resistance at $1.4057 and $1.4080 and the support at $1.3878 is the target for sellers.

EUR/USD has been range bound ($1.0957 and $1.1068) this week and traders will be looking for a breakout. The currency pair has been pushing lower since the middle of the month and the European Central Bank meeting on 10 March could see additional easing being revealed. Should we see a breakout, bears will be looking towards $1.0940 and $1.0892 and buyers will be keeping an eye on $1.1160.

Gold is broadly unchanged this morning and the fact it hasn’t sold off given equity markets are strong bodes well for the rally. The slight softness in the dollar is keeping the metal elevated and the US GDP report at lunchtime will be closely watched by traders. The gold market is sensitive to sentient surrounding US interest rates and while the next rate seems a long way off, that will be positive for the metal.

The Federal Funds Futures market is currently pointing to a 10% chance of a rate hike in March. If gold holds above $1234, its outlook will be bullish and $1253 is the next big support level in sight.

Oil is creeping higher this morning as the energy market continues in its move higher since mid-February. Venezuela has indicated it is interested in cutting production which has led to firmer prices for now. Oil producing nations like to talk about reducing output but have seen little action on that front. Oil has found it difficult to hold onto any decent upward move recently so another decline can’t be ruled out. Brent buyers will be targeting $36.74 and WTI buyers will be focused on $35.20. 

 FTSE risers and fallers (as of 9.30am)

Company % change Index points
HSBC Holdings +2.76 +9.43
Royal Dutch Shell A +2.52 +6.56
Royal Dutch Shell B +2.62 +6.06
BP +2.36 +5.68
Rio Tinto +5.87 +5.07

 

Company % change Index points
Royal Bank of Scotland Group -8.73 -2.69
International Consolidated Airlines Group -1.43 -0.57
SABMiller -0.36 -0.55
ITV -0.63 -0.23
Inmarsat -1.01 -0.17

The day ahead

Economic data:
1.30pm - US GDP (4Q, preliminary): expected 0.4%, prior 0.7%.
3pm – US University of Michigan sentiment (February): expected 91.1, prior 90.7.

Corporate reporting:

US: JC Penney

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