Financial market research and analysis

A squeeze higher in the mining sector following the additional falls yesterday is preventing a complete sea of red on the FTSE this morning as we see a mild bounce in copper prices. The $2/lb level seems to be providing a floor for the base metal for the time being but the trend and indeed the outlook for copper prices is not all that positive. China’s Beige Book allegedly shows deteriorating economic conditions and given that it is the world’s largest consumer of copper, any further growth concerns will likely be a driver for further falls in the metal.
Recent history would indicate that these large swings in the share prices of commodity producers have been characteristic of a downtrend and attempts to catch the falling knife has not been without casualty. This is unlikely to be sustained and risk sentiment surrounding the commodity suite continues to be severely dented as the price of oil continues to decline.

BHP Billiton (+1.51%) – put on review for ratings downgrade art Moody’s following the massive commodity decline. Expects to complete review in 90 days.

Glencore (+2.45%) is higher on some optimism that the debt cuts will keep the wolf from the door in terms of the company credit rating. Spot copper prices would need to hold at current levels for this to hold true. Although it is possible that Glencore will need to do more should commodity prices continue to sink.

Anglo American (+4%) the large cut in assets and a share increase in production amid the metal price rout may be garnering some investor appetite today3

The strong dollar was sure to have ramifications and this is something that the Fed has awoken Sure it puts the US on a path to rate normalisation but the effect on commodity prices, emerging markets, global growth and US corporate profit margins is beginning to hit home with investors. There may have been a case of normalisation for normalisation’s sake. European risk assets have followed those in the US and Asia and with little in the way of corporate or macro data on the slate today the low volumes as we run up to the weekend and the holidays could be an exacerbating factor.

Carnival (-2.39%) Q4 earnings results out before the US open. Expected to post a yoy increase in EPS to 41c per share on revenue of $3.72bn in the 3 months to November 2015.

Standard Chartered (+ 1.07%) CSLA thinks the bank could be a takeover target given that its share p price has halved over the past 2 years if it fails to turn itself around.

Next plc (-1%) In an analyst rating update on Friday shares of Next PLC had their rating reiterated by analysts at Exane BNP Paribas.

The broker said it has now set a ‘Underperform’ rating on shares of Next PLC with a price target of 7300. The price target according to the broker shows a possible decrease of -1.42% from the current stock price of 7405.


We call the Dow lower by 130 points presently to 17365.