Negative territory for the FTSE this morning as a weak Asian session as a result of more poor data from China puts the kybosh on the basic materials sector once again. Chinese industrial profits fell 8.8% in August and are presently lower by 1.9% on the year.
China’s weakening is not simply a bug bear for commodity stocks, Standard Chartered is also lower on the day on foot of the BOE’s warning that it will also be vulnerable to the slowdown.
A plethora of economic data this week will likely keep any risk appetite subdued and while commodity prices are consolidating, it may be too soon to believe a bottom is in. The minor bounce from the August lows for copper has worn thin and the price is presently scraping its knuckles on the floor and trading at $2.27/lb. This is naturally doing little to buoy FTSE stocks with Glencore shares now some 80% lower than its 2011 IPO price. Investec’s note this morning while certainly on the money; that if major commodity prices remain at current levels all the equity value could evaporate, is certainly not helping.
SAB Miller (+3.46%) AB Inbev has proposed £42 per share but SAB Miller is looking for more (£45 per share) in order to whet the appetite of the board. A firm opening offer could happen as soon as today.
Oil prices also remain rather subdues and while the action in the oil complex lacks the large swings that we have become accustomed to over the past number of months, the trend is most certainly down and will continue to look lacklustre as long as the $50 marker remains resistant to upside. Royal Dutch Shell’s decision to halt exploration in Alaska is just one symptom of the faltering price.
Vodafone is taking a fair chunk off the FTSE too, 9 points as talks with Liberty Global failed to bear fruit. The stock is down 3.84% at 2014 lows now.
In macro news, Janet Yellen’s ‘favourite macro data point’ is set for release – the PCE price index. IT’s not expected to set the skies alight with a consensus for a rise of 0.1% on the month. Pending home sales are also due and a smaller increase of 0.4% against last month’s 0.5% rise is pencilled in here. It's a day for FOMC member speeches too with no fewer than four speaking at various events today. We can therefore expect more choppiness as traders make attempts to decipher any hidden messages.
The Dow is slated to open down 35 points to 16380.