Financial Market Research and Analysis

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Cautious start ahead of FOMC minutes
After a couple of days rallying, equity indices are somewhat softer as an early morning raid in Paris this morning invites a degree of caution. The FTSE presently off by 0.5% and the Cac and Dax slightly worse off with losses of 0.87% and 0.49% respectively. If equity markets are in limbo then metals prices are really trying to show how low they can go. Copper continues to fall but has bounced off an important technical support level this morning. Down 55% since late February 2011, any move down through $4557/T would have ever increasing bearish ramifications. At this juncture, there is a sense that this negative outlook on base metals has perhaps become a little crowded and thus a squeeze higher from here cannot be ruled out for the red metal.

In the very near term, much of this will hinge on the FOMC minutes later this evening. With the dollar already in demand, we may well see additional surges in the greenback. Bearing in mind that these minutes were recorded prior to the fairly stellar jobs number in October, one could expect that any perceived hawkishness will effectively be taken as a green light for a rate hike in December

Following a fairly weak start to the morning, the mining contingent of the FTSE is finally catching a bid. Taking the top spot on the benchmark, Antofagasta +2.33% has benefitted from an upgrade from Goldman Sachs from sell to neutral. The company has also stated that it expects cuts in output to help support copper prices which makes the medium term more favourable in its outlook.

This has helped to buoy the rest of the sector with Rio Tinto + 1.2%, Anglo American + 1.07% and Glencore + 1.1% finally snapping out of the 9 day malaise that pushed the stock price sub 90p.

Hikma Pharmaceuticals (+3.17%) JP Morgan have reiterated its overweight rating and £25 price target. Hikma Pharmaceuticals has also said it had overcome concerns raised by the US Food and Drug Administration (FDA) over environmental monitoring issues at its Portugal plant. The FDA in October 2014 sent the company a "warning letter" flagging issues the issues.

Royal Mail (+0.3%) slightly higher ahead of its earnings release tomorrow. RM stock price is off by 18% since its May high of £532.50p and presently seeing support at 435/460p. The declining letter volumes is a major concern and will certainly be a primary issue in the future. Cutting 5500 job led to £40 million savings over the last 12 months, nevertheless one shot cost cutting may not be enough to encourage investors as Ofcom said it will re-examine and may roll back some of commercial flexibility given to Royal Mail in 2012, as fixing higher prices, which may directly impact earnings and push back investors.

Airlines are back under pressure this morning on the back of ISIS concerns with IAG taking the bottom rung losing 2.28% while EasyJet is off by 2%.

The Bank of England’s Broadbent has been on the wires this morning which has given a boost to sterling. His attempts to downplay inflation forecasts and the general market interest in rate hike expectations based off this month’s inflation report gave the pound a minor boost. Suggesting that interest rates will not necessarily remain on hold until 2017 and trotting out the ‘data dependency’ line again – Mr Broadbent’s comments are merely another paragraph in what has become a fairly useless guide to near term monetary policy.

We call the Dow up 15 points.