Commodity stocks are back in fashion as rumours of a Chinese stimulus package are doing the rounds. The mining industry has been battered and bruised recently, but the possibility of an easing policy from China has seen the buyers flood back in again. The last few times China tried to encourage economic activity by announcing a stimulus scheme it has backfired, and sent commodity related stocks crashing, but now there is the feeling that something drastic is needed.
The London trading session for Glencore hasn’t been as exciting as it has for its Hong Kong counterpart, but the stock certainly had a solid performance. There is a lot of speculation surrounding Glencore at the moment, and the most plausible one is the commodity trader is looking to offload its minority stake in an agricultural company.
The firm is fine for cash flow, but its debt levels are high and asset-stripping will do a lot to put the stock market’s fears at ease. There is a lot of talk about the possibility of a takeover attempt at Glencore, but in this environment I can’t see any of its competitors wanting to snap it up for fear they would be viewed as over leveraged. While the share price is north of 100p it will do a lot for investor confidence, and should keep the creditors at bay.
Sterling has suffered due to slowing in the UK services sector growth rate, but when you consider how big the services industry in the country is, the currency has held up relatively well. Oil has jumped as tension in the Middle East are rising as Russia is backing the President in Syria. As the violence continues oil will keep climbing higher.
Russia is interested in opening discussions over the price of oil with OPEC members, and this is a sign that the Western imposed sanctions are taking their toll on the oil-producing country. Other oil-rich states are feeling the pinch because of low energy prices, and OPEC’s production levels might be called into question by its members.
In the US, the Dow Jones is up 150 points at 16,625, as Wall Street is following the rest of global markets higher. The chatter of a stimulus package from China combined with the lower probability of an interest rate hike from the Fed this year has driven US stocks higher. Dealers are jumping on the Beijing-backed stimulus bandwagon whispers, and the weak non-farm payrolls numbers were secretly welcomed by traders as its looks like a rate hike won’t happen this year.