Mining companies mine FTSE 100 hollow

Heading into the close the FTSE 100 is firmly in the red and the mining sector has had a poorer performance than normal. 

Source: Bloomberg
  • Commodity stocks targeted by Investec Ltd
  • Glencore is going, going, gone.
  • William Dudley’s comments fuel quick-fire selling

The mining industry is on shaky ground after Investec warned Anglo American and Glencore that their value would vaporise until radical restructuring was implemented. This ruthless report by Investec had a catastrophic impact on Glencore’s share price which printed fresh all-time lows.

None of the major mining companies could avoid the chaos of the panic selling, and it will be a long time before confidence is restored. In years gone by the mining sector provided a rock solid foundation for the London equity market, but now it’s like an anchor.

Glencore is technically a penny stock, and given the move we have witnessed today it is beginning to act like a penny stock too. Glencore has a market capitalisation of more than £10 billion, for now, and unless the Swiss-headquartered company does some robust re-jigging of its business this sliding share price is here to stay.

In the US, the Dow Jones is down 165 points, at 16,150. William Dudley of the Federal Reserve echoed Janet Yellen’s remarks about interest rates rising this year. Mr Dudley’s commitment to hiking rates before the year is out could not have come at a worse time, as the US stock market was already following its European counterparts lower, and the hawkish commentary made matters worse.

A recurring concern of US central bankers is the level of low inflation, and that is linked to commodity prices which is largely out of their control.

Gold is back under pressure and the short sellers are circling the precious metal because once a US rate rise is on the horizon it will have a horrible time. 

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