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Miners rocket as dollar drop boosts commodities
Shares in Anglo American surge 20% higher and rival FTSE 100 miners aren't far behind as beaten-up commodities surge.
Update: Miners have strengthened their rally in a breath-taking day's trading that has seen some of the stocks worst hit by the commodities crunch surge.
Gold and copper hit three-month highs while oil held onto most of its gains from a spectacular overnight rally to trade at $34.37, helped by a slump in the dollar.
Shares in Anglo American (AAL) rocketed 20% to 328.3p while Glencore (GLEN) was up 16% at 99.7p and Antofagasta (ANTO) rose 15%. Close behind were BHP Billiton (BLT), up 10.8% at 712.6p, and Rio Tinto (RIO), 10.3% higher at £18.58.
That helped the FTSE 100 climb 61 points, or 1.1% to 5,899.
'A breakout in commodity prices which took gold to a fresh three-month high and copper to its highest in a month put the mining sector firmly at the helm of the FTSE 100,' said Jasper Lawler, market analyst at CMC Markets.
'The gains in mining shares were such that today could prove a major turning point for the FTSE 350 mining index, which lagged the FTSE 100 for all of 2015.'
UK interest rate rise prospects recede
(14:30) The FTSE 100 has pared the day's gains amid choppy trading in the pound following the Bank of England's inflation report.
The UK blue-chip index was trading 31 points, or 0.5%, higher at 5,868 points, down from a day high of 5,935, after the Bank of England sent out mixed messages to investors over the timing of an interest rate hike.
The pound, which had made strong gains against a weak dollar since yesterday, initially slumped after minutes of the Bank's monetary policy committee meeting showed a unanimous vote in favour of keeping rates on hold, with Ian McCafferty dropping his call for a rise.
The pound dropped to $1.453, weighed down as well by a gloomy inflation report from the Bank, in which it cut its growth forecast for the UK economy in 2016 to 2.2%, down from 2.5% three months ago.
Sterling later rallied to $1.467 as Bank of England governor Mark Carney insisted during a press conference that the next interest rate move was likely to be higher rather than lower, before falling back to trade at $1.459.
Peter Dixon, economist at Commerzbank, said: 'Although we buy the view that the next move in rates is up, the most obvious risk is that rates remain lower for longer than hitherto supposed.'
Laith Khalaf, senior analyst at Hargreaves Lansdown, said that with rock-bottom interest rates in the UK now having persisted for seven years, a decade of low borrowing costs could not be ruled out.
'A rise in rates now looks firmly in the long grass, with growth forecasts cut and cheaper oil putting pressure on inflation, which is already way below the Bank of England's target,' he said.
'Markets are currently pricing in a rate rise in the middle of 2017, though they have been consistently premature in their forecasts, and reaching the dubious milestone of a decade of ultra-low interest rates is now a distinct possibility.'
The rally in commodity stocks spark by the slump in the dollar meanwhile gained strength. Anglo American (AAL) was up 16.4% at 318.5p, Antofagasta (ANTO) rose 8.8% to 40.8.8p, BHP Billiton (BLT) added 7.9% to 693.7p and Glencore (GLEN) jumped 7.1% to 92p.
Miners rally as dollar drops
(10:29) A surge in commodities sparked by a slump in the dollar has helped miners and oil stocks drive the FTSE 100 higher.
The UK blue-chip index rose 69 points, or 1.2%, to 5,905, with mining companies leading the way. Anglo American (AAL) rose 9.7% to 300.3p, Glencore (GLEN) was up 6.8% at 91.8p, BHP Billiton (BLT) rose 7.3% to 690.9p, Rio Tinto (RIO) added 7.1% to £18.05 and Antofagasta (ANTO) traded 6.3% higher at 399.2p.
The surge in miners came as metal prices rose after a slump in the dollar amid dampened expectations of further US interest rate rises this year.
In raising rates for the first time since 2006 in December, the US Federal Reserve signalled a further four rises were likely this year. But volatile markets against the backdrop of slowing global growth, coupled with signs the US economy is not growing as strong as expected look likely to slow the Fed's hiking cycle.
Yesterday's news that non-manufacturing activity was growing less quickly than expected provided the latest blow to US economic confidence.
Bill Dudley, president of the New York Fed, yesterday argued global financial conditions had tightened since December, and the Federal Reserve would need to take that into account.
'Yesterday's comments from Dudley... point to an increase in anxiety about a tightening of monetary conditions, the effect of a strong US dollar, and the slowdown in global growth prospects, which could keep the Fed on the sidelines in the short and medium term' said Michael Hewson, chief market analyst at CMC Markets UK.
Dominic Rossi, chief investment officer at fund group Fidelity, welcomed Dudley's comments. 'He clearly drew a link between a strengthening dollar and tightening financial conditions as baring an influence on Fed policy,' he said. 'The dollar subsequently fell and equities immediately stabilised. This is precisely the interaction between policymakers and markets we need to see more of.'
The pound jumped a further 0.3% against the dollar, having risen as much as 2% against the greenback during yesterday's trading.
A weak dollar typically boosts commodities, which are priced in the US currency. The dollar's slump also helped the oil price, which breached the $35 mark to trade at $35.43 a barrel, after an 8% overnight rally.
That helped energy stocks climb the index. Shell (RDSb) was up 4.5% at £15.02 despite reporting its lowest annual income in at least 13 years. The oil giant held its dividend as expected.
Among the FTSE 100's biggest fallers was AstraZeneca (AZN), down 4.2% at £42.30 as the pharmaceutical giant warned of a drop in revenue and earnings.
It was a similar story on the FTSE 250, where commodities stocks were in the ascendancy. Tullow Oil (TLW) was up 10.2% at 177.6p while Evraz (EVRE) was up 5.2% at 60p and Ophir Energy (OPHR) rose 4.6% to 87.8p.
Commodities-focused investment trusts also enjoyed a boost. On the FTSE Small Cap index, BlackRock Commodities Income (BRCI ) was up 8.7% at 53p and BlackRock World Mining (BRWM ) 6.3% higher at 177.4p. JPMorgan Russian Securities (JRS ) enjoyed the boost to the oil price, up 4.7% at 299.2p.
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Look up the shares
- Anglo American PLC (AAL.L)
- BHP Billiton PLC (BLT.L)
- Glencore PLC (GLEN.L)
- Rio Tinto PLC (RIO.L)
- Antofagasta PLC (ANTO.L)
- Royal Dutch Shell PLC (RDSb.L)
- BP PLC (BP.L)
- BG Group PLC (BG.L)
- AstraZeneca PLC (AZN.L)
- Tullow Oil PLC (TLW.L)
- EVRAZ plc (EVRE.L)
- Ophir Energy PLC (OPHR.L)
Look up the investment trusts
- BlackRock Commodities Income (Ordinary Share)
- BlackRock World Mining Trust (Ordinary Share)
- JPMorgan Russian Securities (Ordinary Share)
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by Gavin Lumsden on Oct 28, 2016 at 16:26