Financial market research and analysis

The FTSE is having trouble to rebound off the two week lows as miners attempt to retrace yesterday’s losses. The recovery in the energy and miner stocks is on a bumpy path given the resurging global concerns on China and the lack of incentive from both the retail and corporate campgrounds to stop the bleeding in the commodity and metals market. South Africa’s mining production is 4.6% lower on the year to October; the gold production has contracted by 7.5% over the same period.
The sentiment vis-à-vis the miners is mixed in London, the miners switched from the top gainers to top losers in London. Rio Tinto (+2.27%), BHP (2.59%) and Glencore (+0.63%) added 4 points to the FTSE earlier yet failed to consolidate gains while Anglo American (-8.60%), Fresnillo (-7.11%), and Antofagasta (-1.97%) continue having a mare.

Ashtead Group is the biggest gainer this morning following the encouraging 21 percent rise in its 2Q pre-tax profit. The company raised its interim dividend to 4p, fairly above the 3.5p anticipated, as the well performing business is now seen to lead to a better-than-previously-predicted FY result. The capex guidance has also been increased to £1.1bn from £1bn.

The pound holds the ground against the US dollar at 1.4995/1.5000, although the support at this level is certainly fragile amid news that the manufacturers contracted activity by another 0.04% during the month of October.

The MPC meets tomorrow and is expected to maintain the status quo.

The probability of a Fed rate hike in December reached 80% as the US yield curve continues shifting higher. Given the melancholic macro-economic scenarios, a December action may not be the best in terms of timing. Nevertheless, the Fed seems to be stuck in the corner by the high level of expectations and will have no other choice but to proceed with the first rate hike in December. In this context, the possibility of a 10-15 basis point increase, instead of the 25 basis point hike that is being presently priced in, should not be ruled out.


New Zealand to cut rate

The RBNZ meets later tonight and is expected to cut its official cash rate by 25 basis points to 2.50% - back to the historical low level that we have seen post-2008 crisis. The RBNZ’s second attempt in policy normalisation ended in tears. The softening demand in NZ’s dairy products, especially from the biggest consumer China, remains a sizeable challenge; even more when the NZ dollar gains on carry appetite because it offers a good return opportunity on rate differential bets. Exactly the same issue as in Australia, the RBNZ has little option but to cut its rates in order to push back the carry inflows as some of their major peers, as the ECB, the BoJ, the BoC and the RBA stay on the policy loosening path.