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M&A activity lifts miners
Price action on the FTSE 100 today would have been a lot uglier were it not for some fortuitous M&A news among the miners. The sector, perhaps one of the handiest gauges of global economic expectations, has seen several false dawns with the summer slump being the ugliest, but the prospect of a flurry of deal-making would be just the ticket to draw attention away from the ongoing decline in commodity prices.
Glencore’s move is particularly brave given the apparent shift to divestment of non-core activities that has been a trend among big miners, but it is a typically gutsy move from a firm that has a reputation for standing out from the pack.
Meanwhile airlines and other travel firms have been aggressively sold on fears that Ebola concerns will lead to a round of travel restrictions, with BA parent IAG and cruise line firm Carnival both shedding 6%.
US markets await Fed speeches
It was another shaky start in US indices, which are not immune to the growth fears stalking equity markets, and it still looks like this is a market flailing for direction.
Fortunately earnings season is just around the corner, with a robust update for Alcoa ideal for assuaging concerns that the world’s economy is struggling for growth.
Federal Reserve speeches later on today will make for a choppy session on Wall Street but it is tomorrow’s Fed minutes that will be keenly watched. The doves are still in the ascendant on the committee, but any sign that they are looking to compromise in coming meetings by amending the language of the statement could see stocks slip back once more.
Gold's slump continues
Gold and silver prices rallied in the morning but the slump resumed later on despite continued losses on equity markets. Gold might be a safe haven in times of turmoil, but with yields at a premium investors are switching to the usual suspects, the dollar and US Treasuries.
Gold advocates have been bravely increasing positions but the precious metals sector is not immune from the turmoil in other commodities. The dollar is still king, and commodity bulls would be wise not to forget this crucial fact.
Sterling has edge over euro
We haven’t seen two consecutive gains for GBP/USD in over two weeks, but today’s move still resembles a bounce from oversold conditions rather than the beginning of something more sustained.
In the dubious beauty parade of economic data, sterling still has the edge over the euro, helped by that dire set of German factory orders this morning, but overall the dollar still commands attention. A rally to $1.62 is still going to attract sellers in GBP/USD, while EUR/USD’s inability to push meaningfully through yesterday’s highs sends a signal that more downside is on its way.