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The Krips Report: London Stocks & Commodity Prices

By November 30, 2015 No Comments

London stocks ended lower on Friday on a slump in the mining sector as commodity prices declined.

The FTSE 100 finished down 17.98 points to 6,375.15 led by Anglo American, Fresnillo, Glencore and Randgold Resources. Gold, silver and platinum prices fell, although copper continued Thursday’s gains. Oil prices dropped with Brent crude down 0.84% to $45.08 per barrel and West Texas Intermediate down 1.04% to $42.05 per barrel.

Gains are proving hard to sustain at end of the week, and with US markets on a half day and important events looming, most investors are struggling to find a rationale to keep buying into equities. Two days of gains, helped along by thin volumes, have given way to modest losses.

Chinese stocks overnight Friday brought back unhappy memories of August, and as a result we saw heavy losses for miners once again.

The Shanghai composite finished down 5.49%, the largest daily percentage loss since 18 August as Chinese authorities investigated brokerages Citic Securities Co. and Guosen Securities over suspected violations.

Meanwhile, investors seemed to shrug off UK economic growth data as there were no surprises. The second estimate of third quarter UK gross domestic product from the Office for National Statistics showed an annualised unrevised growth of 2.3% in October, as expected by analysts. The quarter-on-quarter comparison was also unrevised at 0.5% growth in the three months to September, down from 0.7% in the second quarter and in line with forecasts.

Confirmation of reduced GDP growth of 0.5% quarter-on-quarter in the third quarter reinforces our belief that the Bank of England is unlikely to raise interest rates before the second quarter of 2016.

However, the Bank of England is expected to act before mid-2016. As the UK will see some improvement in growth from its third quarter soft patch and that consumer price inflation will start rising gradually from late-2015.

Other data published by research company GfK showed UK consumer confidence declined to a six-month low in November. The consumer sentiment index declined from 2 points to 1 in October, the lowest level since May and falling short of analysts’ expectations for an unchanged reading.

UK house prices growth slowed by more than expected in November to record the smallest rise since June, according to research by the Nationwide Building Society.

Chancellor George Osborne’s new 3% surcharge on Stamp Duty on buy-to-let (BTL) properties and second homes, which was announced this week and will come into force from April 2016, is expected to lead to a frantic rush as prospective investors snap up properties in the next four months to avoid the new charge.

Elsewhere, Japanese data showed an unexpected fall in the jobless rate to 3.1% in October from 3.4% the previous month, while the consumer price index rose to 0.3% year-on-year last month from 0%, as anticipated by analysts. However, CPI fell 0.1% year-on-year, as predicted, when stripping out volatile food prices.

Japan’s household spending dropped 2.4% in October, compared to forecasts of 0% and September’s 0.4% decrease. The reports come amid pressure on the Bank of Japan to increase its bond buying programme in the coming months following prolonged weakness in inflation.

There was no respite for the gold price as it sand $20 over the week to its lowest since early 2010.  This comes as mounting expectations that the US Federal Reserve will raise interest rates next month.  This has also pushed the dollar higher sharply.