The FTSE is biting off offers above the 6900 handle, as the unattractive gilt yields and the weaker pound improve investors’ appetite in the UK’s stock market.
Energy and miners lead gains in London, after Saudi hinted at a potential ‘stabilisation’ at next month’s OPEC meeting. The recent comments should help prevent a new slide in the price of a barrel of crude below the $40. Royal Dutch Shell (+1.13%), BP (+1.13%)
Glencore (-0.08%) underperforms the sector stocks as news that the company abandoned it plans to sell a copper mine in Chile, hit the market. The sale was expected to generate circa $500 million. As copper prices are seen at depressed levels for an unknown period of time, investors remain mainly focused on companies’ ability to generate cash by asset striping and reducing debt levels.
The pound trades below the 1.30 level against the US dollar for the second time in the past week. The market is heavily short in the pound, and traders are expected to sell into the short-term rallies. A failure to fight back the 1.30 resistance should bring in a larger downside scope for the pound-bears. From a technical perspective, the persistent yet slow depreciation in the pound has prevented the GBPUSD from stepping into an oversold market. Hence, there is room for a further downside before exhaustion in the current negative trend.
The pound could cheapen to 1.25 per dollar in the medium term. Euro at a critical support
The EURUSD is hovering around the 200-day moving average, 1.1140. The major 38.2% retracement on August 5th to August 10th rally has been a good support in Asia. A break below this level could hint at a pullback to 1.1100 and gain further downside momentum below this level, combined with decent option expiries waiting to be activated before the weekly closing bell. Calls remain supportive of a stronger euro against the US dollar above the 1.1150 level.