Firm commodity prices underpin market rally

As commodities continue to edge higher and drag the mining sector with them, Tesco's profits collapse by 55% year-on-year.

Miners at work
Source: Bloomberg

Just over a year into the role, Tesco CEO Dave Lewis has overseen an extended period of asset stripping for the company which he believes is now at an end. This company restructuring and rebalancing has not been without its costs. The last quarter has seen the company’s market share continue to be eaten into as year-on-year profits have collapsed by 55%. Tesco still has the lion’s share at 28.8%, but the template of smaller firms chipping away at its dominance shows no sign of changing. But an end to the Tesco fire sale might be the beginning of a new dawn for the embattled food retailer.

SABMiller's board continue to hold out even as AB InBev’s fresh £42.15 bid per share tests their resolve. Pension funds around the City will be sitting a little more comfortably this morning with confirmation that, regardless of market instability and falling profits, Royal Dutch Shell will be maintaining its dividend payments to shareholders. 

Surely the fact China is now enjoying its third bank holiday this week and commodity prices have experienced a relative calm during this time can’t be a coincidence. With oil, gold, copper, and nickel all driving higher, the list of FTSE climbers is dominated by mining and energy companies all benefiting from a respite in commodity selling. This new tolerance from traders will no doubt be tested this afternoon with the latest release of US oil inventories. We are expecting the Dow Jones to open 107 points higher from Tuesday’s close at 16,877.  

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