Market Comment: Commodities upset the apple cart

Greece is back in the news again, though fortunately not for making waves in markets

But our market took the result in its stride as trading commenced in the last full week of September. Even the news that Swiss insurance giant Zurich would not now proceed with a bid for UK insurer RSA failed to dampen spirits, despite a fall in the RSA share price impacting on the FTSE 100 Share Index. True, shares hardly raced away initially, but given the apparent upset that the Fed’s decision not to raise interest rates in America caused, a quiet start to the week felt like a bonus.

Not that the calm lasted for long. A sliding copper price saw mining shares come under pressure as the week progressed. At one stage Glencore was down by more than 12%, with other prestigious mining companies suffering as well. It knocked the FTSE 100 Share Index below 6000, such is the importance of the resource stocks to the wellbeing of our benchmark index. It all goes to show how fra gile confidence can be at times.

Markets can be difficult to read. The expectations for a dovish approach from US policymakers last week should have been factored in, but delaying an interest rate rise did worry investors who were concerned that economic problems, particularly in emerging markets, might be greater than feared. It does now look as though the Bank of England will not move on the interest rate front until next year – perhaps quite late in the year, too. Indeed, it has even been suggested that rates in this country might be cut before being raised.

Meanwhile, the next few weeks should be quiet on the company news front, with little in the way of economic news for investors to get their teeth into either, though early October should bring a crop of statistics. Purchasing Managers Indices, which can give a useful steer as to how business is viewing the future, will be of particular interest. A drop in these indices suggests that business is reining in expectations for growth, so figures from China will be looked at very closely. But noises from the Fed will be listened to avidly as well.

Brian Tora is an associate with investment managers, JM Finn & Co.

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