Financial market research and analysis

The UK is giving a royal welcome to Chinese President Xi as the visit could lead to an additional £30 billion investment deal  (on top of £14bn secured last year), create over 4000 jobs and also help UK exporters to expand their client base to a sizeable 1.5 billion people economy. Such a deal would take some pressure off the UK’s exporters, mainly concerned about a strengthening pound over the past months, and help improving the UK’s trade terms.

A stronger pound is the price to pay for lower deficit. Cable is testing 1.55 mark in early London trading. Trend and momentum indicators point on the upside. As long as the pound remains above the critical 1.5355 versus the US dollar (Fib 38.2% retrace on Sep 30 – Oct 15 rise), there is potential for extension of the bullish trend to 1.5608/15 (Fib minor 23.6% retrace / weekly target) then 1.5659 (Sep 18th high).

FTSE made an enthusiastic start in London but rapidly lost conviction as losses in UK miners painted the market in red. Glencore (-2.32%), BHP (-1.92%) and Anglo American (-1.90%) are leading losses in London.

Anglo American will release its third quarter production update on Thursday and the fall in diamond production in the previous quarter could well weigh on Anglo’s second half revenues, after having grasped a decent 16% margin in the first half of the year. A deterioration in the revenue margin will interfere with management’s aggressive dividend policy and drag Anglo’s shares lower. Anglo’s adjusted EPS estimate has dropped by 6.70% over the past four weeks and the stock price pared two-thirds of October gains already and one-third of brokers are positioned on the sell side. At 15 year lows, the company shares may well be undervalued. The twelve month average target price is £815p.

Saudi runs out of fuel

The oil eases to $46 as Iran deal is getting close to a deal with Western nations.

Saudi Arabia is losing its breath in its fight for market share through cheap oil prices. The fact that Saudi delayed its payment to its creditors brings up the possibility of an agreement with other oil producers to constrict production and let the prices surge toward at least to $70-80 levels.