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The FTSE 100 was weak from the off today, down 60 points almost immediately after opening. It was a big day for mining stocks, with Glencore Xstrata and BHP Billiton both reporting. Glencore profits were better than expected; BHP missed slightly, but the net result was a negative start for both, which dragged the index lower. As the mining sector still makes up around 15% of the blue-chip index, it was always going to be tough for the FTSE to recover completely from this early drubbing – but going into the close, at least the bulk of early losses had been somewhat eroded. In early July there were plenty of buyers queuing up when the FTSE dropped back to the 6400 zone, so the optimists will be hoping that recent history will start repeating down at these levels. It is certainly an area likely to be closely watched by traders and investors alike in the days ahead.
As London markets got ready to finish for the day, the Dow was relatively quiet, flipping from positive to negative around the 15,000 level. With the latest minutes due from the US central bank on Wednesday, and an overall tone of caution due to the traditional summer lull, it would not be surprising to see this lack of conviction continue in the short term. With the US company earnings season now behind us, it is once again all about the central bank’s stance on QE. So those minutes on Wednesday evening, and more importantly the market’s reaction to the release, should give more clues as to direction in the weeks ahead.
The price of US crude oil continued to ease back on those ever-familiar concerns about the Federal Reserve reining in its stimulus measures. This was not too surprising for many, but one market that did put in a better-than-expected performance was gold. A big story of the day was the amount of physical gold that has been exported from the UK in recent months – up eightfold so far this year as investors continue to sell gold-tracking exchange traded funds. The yellow metal managed to shrug off this apparently bearish news, and rallied back to the top of Monday’s range as investors used it as a safe-haven destination compared to some of the turmoil going on in certain emerging markets.
The big currency story of the day was the freefall in emerging markets – particularly the Indian rupee, which dropped to a record low against the US dollar. Once again, blame here is being laid firmly at the door of the US central bank, on worries that dialling back QE will only encourage capital outflows from the region. Closer to home, the euro hit six-month highs against the greenback, partly helped by weaker-than-expected US economic activity data. The 1.3400 level has been quite the barrier for EUR/USD in recent months, and many are feeling that now this level is finally cracked, it could well herald further euro gains to come.