Ugly day for London market
It has turned into a very ugly day for the London market, as a confluence of bad news provided the spark for heavy selling across the board that has left just eight stocks in positive territory. A cut to the World Bank’s growth forecasts for 2015, and a warning not to rely solely on the US for global growth, meant that copper, the traditional bellwether for economic growth, was hit hard.
Meanwhile, a dire reading on US retail sales and underwhelming results from JPMorgan hit risk appetite hard as well. The knock-on effect was seen in the carnage in the mining sector, with major names like Anglo American and Glencore, that have heavy exposure to copper, shedding as much as 8%, and even Rio and BHP enduring falls of over 4%. Volatility is certainly back on the agenda, which makes life very difficult for the longer-term investor but provides ample opportunities for those of a nimbler disposition.
US retail sales numbers causes concern
US markets took their cue from the selloff on this side of the Atlantic, while a mixed bag of results from JPMorgan and abysmal retail sales figures for December meant that reasons to hold equities were few and far between this afternoon. The retail sales number was particularly worrying, given that it severely damages the theory that lower oil prices are good for consumer spending. Taken with the World Bank’s warning, sentiment is very much ‘risk off’ this afternoon.
JPMorgan may have enjoyed record net income for 2014 as a whole, but the continuing decline in fixed income trading activity will have many investors concerned, borne out by the 4% drop in the share price during the afternoon.
Copper takes market focus
Copper has commanded all the attention today as it hits its lowest level since mid-2009. It is as if investors have just remembered that there are supply gluts in other commodities apart from oil, and that copper is a prime target for more selling. Given weakness of demand in China it looks eerily like the fundamentals that have caused such havoc in oil are at work in copper too, which bodes ill for the metal and mining companies generally.
Meanwhile gold got a further lift from the weaker US dollar and safe-haven buying, as it continues its break out from the 26-month downtrend that began earlier this week.
EUR/USD at nine-year low
The European court of justice ruling and then the US retail sales figures made for a fun day in EUR/USD. The currency slid to nine-year lows against the US dollar as the decision from the ECJ appeared to provide further rationale for quantitative easing from the European Central Bank, even if the OMT and QE are rather different entities. Following the release of the US figures the dollar weakened rapidly, allowing the euro to rally. Reality has set in again as the afternoon continues, however, with the single currency unable to hold on to most of its gains.