Commodities climb as China is closed

In mid-morning trading the FTSE 100 has climbed over 1% as natural resources stock forms the basis for the rally. 

Mining trucks
Source: Bloomberg
  • Commodity companies bounce back
  • Glencore gains buying momentum
  • No warning from Yellen helps US market

Stock markets have started the quarter on a positive note, and traders are holding onto the bullish feeling as the commodity comeback continues. The two Chinese manufacturing reports that were released overnight showed the sector is squarely in contraction, but they were broadly in line with estimates so traders remained calm.

The Chinese market is shut until mid-next week, and this will help remove volatility from the global markets, as the nation has been the epicentre of major selloffs recently. When it comes to China these days, as long as the figures are not terrible they are deemed to be respectable, and while the market is closed it will entice buyers back into the mix.

Glencore shares are eyeing the 100p level. This will be a crucial test for the stock as many dealers are waiting in the wings to pick it up at a cheap price, but others are held back by fear.

The intense buying of Glencore is beginning to wane and its moves are returning to normal now that creditors have been assured the company has a strong cash flow. However, the question is whether or not there will be a long-term pick up of the slack from the speculators? Glencore will stand to benefit from the closure of the Chinese markets for the next few days, but the company can’t hide from the market forever, and once China re-opens next week it will be a real test for the stock.

We are expecting the Dow Jones to open 150 points higher, at 16,430. The strong finish in Asia overnight has pulled the US futures market higher, and Janet Yellen’s lack of commentary regarding monetary policy has kept the sellers at bay.

Ms Yellen likes to warn from time to time that interest rates will rise soon, but since there were no words of caution last night traders are taking it as a positive sign. 

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