After an initial positive start this morning equity markets in Europe have struggled to push significantly higher after yesterday’s sharp losses. Once again it’s been the basic resource sectors that have acted as an anchor on the overall market with Anglo American once again leading the decliners, with Glencore not too far behind, as iron ore prices continue to slip lower, though copper prices do appear to be holding up.
Overnight Chinese CPI inflation data did show some signs of picking up, however factory gate prices continued to remain weak, coming in at -5.9% for the fourth month in succession.
Gold and silver miner Fresnillo is also sharply lower on reports that the company is being investigated about a 450 ton toxic spill at the weekend at its Saucito mine in Fresnillo.
Oil prices are enjoying a little bit of breather early on ahead of this afternoon’s US inventory data, but this rebound doesn’t appear to be translating into a recovery in oil company shares with Royal Dutch Shell shares under the weather near multi year lows.
On the plus side equipment rental company Ashtead is sitting top of the pile after posting some decent numbers in its first half trading update. Revenue growth of 17% and an interim dividend of 4p have seen the shares move up sharply, back towards the 1,200p highs last seen earlier this year.
As we head into the US open, reports of another mega merger deal; this time between Dow Chemical and DuPont is failing to overcome the prevailing sense of uncertainty surrounding financial markets as we head into the Christmas period.
Aside from potential regulatory concerns these merger talks are yet another example of management of big companies, under pressure from shareholders to extract value from all parts of the business.
Yahoo has also announced that it is abandoning its plans to spin off its $32bn stake in Alibaba, over concerns about a large tax bill.
With next week’s Federal Reserve rate meeting looming large questions are once again being asked as to the wisdom of raising rates at a time when there is so little clarity about the overall inflation outlook as commodity prices continue their downward trajectory. Last week Fed Chair Janet Yellen said that the improvement in the labour market had strengthened confidence that inflation will move back to the Fed’s 2% objective in the medium term.
Given the sharp declines seen across the commodity complex this year alone it’s hard to imagine where this confidence is coming from given that inflation has been well below the Fed’s preferred measure now for 42 months in a row.
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