Financial market research and analysis

Despite brave attempts yesterday to push higher, the FTSE has once again seen the 6000 level give way as materials sector once again sinks. Glencore’s recent attempts to prop up its share price have been rendered rather fruitless as once again the beleaguered company takes the bottom spot on the index falling 9% to yet another all-time low.

At this point, we’ve seem promises of debt restructuring, a £1.6bn share placing and plans for more asset sales and cost cutting, investors are still not having to look too far to find reasons to continue the sell-off. Mining stocks overall are under significant pressure and erasing 15 points along from the UK benchmark.

The failure to hold above the 6000 level is one thing but the FTSE has failed repeatedly to make inroads towards the 6300 since the beginning of the month without any success. From a technical perspective, the is does not bode well and coupled with the ‘Death Cross’ which established itself in early August, the failure of this support tends to open a path toward the lows around 5800. (24th August lows)

The Fed inaction last week was yet another boot in the stomach for commodity related companies  as spectre of lower global growth and its effect on demand for basic materials is still spooking investors. These fears have been confirmed further as Anglo American (-7.2%) was subjected to a ratings downgrade from Credit Suisse.

Tomorrow’s release of the Chinese Manufacturing PMU data will need to be fairly decent to give any buoyancy to investor sentiment and given that the August number posted a 6.5 year low, expectations are rather low. The Caixan Purchasing Managers’ Index fell to 47.3 in August ; a sharp decline from July’s figure.

The Volkswagen (-5.56%) story continues to unfold with South Korea now weighing in and the likelihood of class action suits, particularly in the US is weighing on the stock. The share price decline in one of Europe’s largest automakers is a doing little to help the Dax which is failing to take advantage of the weaker euro, dropping 2.3% and has established itself well below the psychological 10,000 level.

Macro wise, the UK showed its highest August budget deficit since 2012 as the tax take from individuals and corporates dropped. This was a lot worse than was expected. Sterling has fallen below the $1.55 marker.

We are calling the Dow lower by 150 points.