The London market is creeping higher today, and the short covering in the mining companies is laying the foundation for the positive move. Traders have become accustomed to uncertainty, and now the shortage of big macro stories has left dealers wondering what to do. The Greek stock market has its own problems, but they are self-contained at this stage. The Athens administration must make a number of repayments later this month, and until then the markets will be lacklustre.
Shares in RBS are lower this morning after the government began to unwind its position in the bailed-out bank. The taxpayer has begun to realise its loss on the struggling financial institution, and this is only the tip of the iceberg as Westminster will spend years unravelling its stake. In the long-term the return to private ownership will boost the share price, but in the near-term things will get worse before they get better.
Silver miner Fresnillo is suffering today after the firm revealed a collapse in profits. The mega miner has increased its production of silver and gold with the intention of squeezing out smaller producers, but the firm will keep enduring falling profits until the underlying metals have a change in fortune, and that doesn’t look likely for some time.
We are expecting the Dow Jones to open 40 points higher, at 17,600, as the US futures market bounces back from last night’s decline. The Dow has been in decline since May, and now that the US reporting season is coming to an end, and the Fed’s meeting is on traders’ minds, the downward trend is here to stay. Dealers are very much divided over the possibility of an interest rate hike next month, but those who don’t foresee a rate increase can’t be convinced to buy into the market.