- Wall Street takes a breather, Asia brighter
- FTSE set for sluggish start
- Copper shock – prices surge after tragic accident at Indonesian mine
- Worrying signs of weak demand for gilts
- HSBC claims Quantum Computing breakthrough
- Petershill Partners – Here today, gone tomorrow
- M&B shows Brits starting to spend less as the weather cools.
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Wall Street took a breather last night, with the Dow, the S&P and Nasdaq indices each giving ground, with losses averaging about 0.3%. The dollar remains under pressure against a broad swathe of leading currencies, reflecting the Trump administrations repeated calls for a lower Greenback to aid US exporters’ sales efforts around the world. Asian investors took a more optimistic approach in trading overnight, with Japan’s Nikkei index rising 0.3%, with modest gains in Hong Kong, China and Australia too.
Tesla shares bucked the downward trend last night, adding 4% to $443, with Meta, Intel and Microsoft all making gains too. Amongst the market losers, Nvidia, Apple and Alphabet were the biggest contributors to the market’s weakness. Individually, their losses were less than 2%, but their huge size means that even small moves can sway the index in either direction. Standing out amongst the losers though was mining giant, Freeport McMoran, down some 17%, more on that below.
UK and European markets have opened lower, with the FTSE100 losing around 0.3% to trade around 9,222 with the major European indices all showing modest losses, averaging around 0.4% in early trading this morning. Copper producer Rio Tinto tops the leaderboard, up 1.5% whilst healthcare specialist Convatec is the biggest loser in the Footsie, down some 4.8%.
The slump in Freeport McMoRan Inc shares came after the miner called Force Majeure on deliveries from its Grasberg copper mine in Papua, Indonesia. A mudslide at the mine tragically cost the lives of two employees and five more are reported missing. Grasberg is one of the largest copper mines in the world, accounting for around 3% of global supply, which will now be removed from the market for an as yet unknown period of time. Copper is a metal in demand already because it is a key component in the growing electrification of economies. When news broke of the tragic events at Grasberg, copper prices jumped by hundreds of dollars per tonne. That put a flame under the prices of copper producers, with London-listed Antofagasta, owner of some of the largest South American copper mines, soaring by over 9% yesterday afternoon. Today, the market will have to take stock of events and decide whether the knee-jerk was an over-reaction to a shock, or the start of more meaningful gains for the copper sector.
Many will be keeping an eye on gilts today after yesterday’s market action. Yields on 30-year UK government bonds hit a multi-decade high point earlier this month, as markets asked hard questions about the UK government’s tricky financial tightrope. Yesterday saw weak demand for new gilt issuance with the lowest excess of demand for some time seen in the latest gilt auctions, where the Treasury’s Debt Management Office sells new bonds to fund the government’s day to day business. Today’s auction of £2 billion of nine and thirteen-year debt is the next step many – including the government – will be watching closely.
Finance and technology have long been intertwined, with the big trading houses using advanced tech to try and gain trading edges over one another. HSBC has announced a breakthrough in deploying groundbreaking quantum computing technology to improve predictive accuracy in the bond markets. It might be theoretical today, but HSBC seem confident that they will be able to deploy this into real-world applications across the trading floor in fairly short order. That could spark an arms race amongst the major trading houses to develop their own capabilities, for fear of losing their own edges. In the markets, anything that shaves a fraction of a second off a trade or that improves the maths behind how the algorithm’s work can be like gold dust for the first movers.
Farewell to Petershill Partners, which has announced plans to return capital to shareholders and delist from the London market. Floated a few years back, Petershill was always a strange beast, providing capital to private asset managers in return for stakes in their businesses. The market never really got its head around how it all worked and what it was actually worth. Now the original backers of the group, who still own the large majority, have decided enough is enough and rather than sit watching the group languish at a hefty discount to book value, they are offering to buy out the minority investors at a premium to the market price, but still at a discount to the book value. Petershill shares leapt 33% higher on the news.
Temperatures are dropping and rain clouds have spilled their worst over the pub gardens of Great Britain in recent weeks. Sure enough, pub group Mitchells & Butlers has popped out a trading statement saying that recent sales growth has slipped, with demand cracks appearing in the London area as well as some of the premium brands in the portfolio. The group say their sales are still ahead of the industry averages and they consider themselves well placed to grow in the years ahead. The question is, how much of this is just about a bumper summer ending and how much is a sign of households tightening their belts as we head toward what could be a tough budget later this autumn. Either way, the market does not like the news, sending M&B stock down over 6% at the open.
Crude oil markets seem to be holding around their recent highs, with Brent futures holding above $69 as the month draws toward the end. That will make for a two-month window during which oil has traded between $65 and $70, just below the twelve-month average rate of $71. Bulls will point toward geopolitical tensions, from the Middle East and Asia to Ukraine. Bears however point to the ample availability of supply in the market. With both drivers set to remain in place, that sideways window could be about to get extended further. Meanwhile on the currency exchanges, it is a down-dollar day, with losses against sterling, Yen and euros. Today’s latest rate is $1.346.”
