European markets' bounce continues

Firm commodity prices underpin the markets' rally.

A miner walking through a tunnel
Source: Bloomberg

Christine Lagarde and the IMF committee who are currently in Lima for their annual meeting have downgraded global growth from 3.3% to 3.1%. This is just the latest in a long line of major financial think tanks that have increased the negative weighting they are giving the cooling Chinese economy.

The Federal Reserve’s recently published minutes stated the situation in Asia had not ‘materially altered’ the economic prospects in the US. The minutes then proceeded to extensively discuss the situation in Asia, calling into question the validity of the initial statement.

If last night’s Alcoa figures are setting a template for this latest US reporting season then markets could see last quarter’s $11 trillion equity valuation collapse being added to. Once again the institutional analysts had set a relatively low bar and yet Alcoa still tripped. The US aluminium company has seen the metal’s selling price crumble by 25% over the last year, resulting in a quarterly loss of $59 million compared to last year’s $245 million profit.

The bounce that we have seen in commodity prices over the week has continued to hold, and in the case of oil has even been added to. These more encouraging levels have seen the energy and mining-heavy FTSE show the sort of resilience required to ensure the normally investor-friendly fourth quarter of the year holds true to form.

The conundrum that is Glencore continues to baffle traders. Although it enjoys a market capitalisation of a major global corporation its shares are now back to last month’s placing level and are showing the sort of volatility normally associated with penny shares.

We are expecting the Dow Jones to open 22 points lower from Thursday’s close at 17,028.  

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.