Financial market research and analysis

High volatility and large swings are on traders’ agenda today. Shanghai’s Composite reversed early gains and ended the session 2.10% lower. Nikkei gained 1.43% after the larger trade deficit in Japan kept the additional stimulus speculations alive. The US and European equity indices remain rangebound given the fear of a potential squeeze on Fed.

The UK retail sales were mostly in line with expectations in August, in contradiction with recent reports that had pointed at a worse sales decline since the beginning of the global financial crisis in November 2008. Despite the crowded data, the improvement in wages is a leading indication that better days are ahead of us.

The Fed decision is important for the Bank of England. If Yellen pulls the trigger, the BoE hawks will come back on the battle field, regardless of when China could hit the bottom and how deep could it dive.

Miners are bouncing back this morning and are ultimately keeping the FTSE from falling through the 6200 support level. The massive earthquake in Chile, which has led to over 1 million being evacuated, has underpinned copper prices on supply concerns and this has led to a bounce in the mining complex although Anglo American and BHP says there mines were undamaged.

A quick glance in this market suggests that the early uptick in copper is unlikely to give way to a further bullish development. According to the World Bureau of Metal Statistics, H2 is set to be even worse in terms of Chinese copper consumption. The auto industry sales dropped 3.4% year on year – this industry uses more than 10% of Chinese copper demand. Given China’s dull economic performance lately, no fireworks are expected to paint the skies in China in the second half of the year. Hence we can likely expect the bounce in copper prices to be short-lived.

Today is the very much expected FOMC decision day. Nothing else matters. The market is expected to remain ranged and to swing directionless in order to finalise the latest adjustments before the FOMC decision scheduled at 1900BST. What might happen is anybody’s guess. The US sovereign bonds price in 32% possibility for a rate hike later today, while the opinion in the market place is quite trenched.

Sometime before the end of the year, the Fed may need to take the first step even if the market conditions are not ideal to step into a policy normalisation period. Promises have been made, a step back could damage the credibility of the Fed, which could be more costly in term than seeing the cheap money addicts unhappy for a couple of days.

One thing is sure: there is no ideal time for taking the candy from a baby.

Today’s equity highlights:

BHP +0.71%

Anglo American +0.99%

Rio Tinto +0.86%

GKN (+1.31%) Raised to outperform at RBC Capital

Babcock (-2.83%) Cut to underperform at Exane.

Old Mutual (+1.42%) seeks to build African Financial Services giant, aiming to reach 10m customers by 2020, excluding S.A.

Merlin Entertainment (-0.87%); customers are still avoiding its Alton Towers theme park after a horrific accident earlier this year left four people were left seriously injured. Group like-for-like sales rose 0.3 per cent in the 36 weeks ended 5 September, including the key summer trading period of July and August. Legoland parks were the saving grace for Merlin as like-for-like sales increased 6.7 per cent during this period, however theme parks - which includes Alton Towers - fell 11.4 per cent.

Sage Group (+0.68%); Archer Capital has lost its long running court case against Sage where it claimed that the software company had reneged on a $1.35bn deal. Sage are expected to attempt recovery of costs.