Member Article

FTSE ends higher despite continuing commodity slide

The FTSE 100 was a noticeable underperformer among European equity markets this morning, its weighting towards commodity stocks initially dragging it lower by around 1.7% as commodities suffered their fourth straight day of losses. Gold and silver finished a volatile day of trade lower by around 3% although gold reached a low of around $1530 per ounce prior to the European open, before closing at $1612, whilst silver was at one stage off more than 6%. The raising of margin requirements by the Chicago Mercantile Exchange (CME) Group was detrimental to the precious metals, as again investors had to liquidate holdings to fund open positions. Copper also fell more than 6% at one stage, its sub-$7,000 price representing the lowest in 15months. The CAC and DAX began in positive territory as suggestions were made that a rescue plan for Greece had emerged from talks with the IMF.

The above plan was expected to involve a 50% write down in Greek Government debt, with an increase in size of the EFSF to €2 trillion through leveraging its existing €440 billion. The news helped boost risk sentiment through the morning, the FTSE fought back into positive territory and at one stage experienced a 1.6% gain as banking stocks benefited from perceived progress in Europe. Rumours that the ECB was considering a 0.5% cut in its interest rates may have helped propel the rally, a welcome proposition considering the recent round of hikes have left the current rate at 1.5%. The rumours were however unconfirmed and the market trended lower into the close of trade.

The banks held onto their gains to be among the FTSE 100’s best performers, Barclays topping the leader board with a 6.9% gain that saw it end the day at 156p. Miners also maintained their position at the bottom of the index, Fresnillo seeing its shares drop a further 6.9% in response to the gold and silver price. The FTSE 100 ended the day up 0.5%, significantly behind the CAC and DAX which finished the day up 1.8% and 2.9% respectively.

This was posted in Bdaily's Members' News section by John Dance .