The FTSE 100 completed a notable reversal on Monday after starting the day deep in the red amid a metals selloff that hit precious metals and copper miners.
London’s leading index fell as low as 10,145 before rebounding to trade 0.35% higher at 10,258 at the time of writing.
“Commodities markets have experienced a significant shockwave, with metal prices down sharply. This has reversed a winning trade for the plethora of commodity producers on the FTSE 100,” said Russ Mould, investment director at AJ Bell.
“Miners including Fresnillo and Antofagasta, and oil producers BP and Shell, were pulled into the red as investor sentiment towards their sectors wanes and earnings prospects are dampened as the prices of their goods have dropped sharply in a short space of time.
“Gold has now fallen 21% from its $5,594 per ounce peak on 29 January to an intraday low of $4,403 per ounce. Silver has fallen by more, down 32% since its year-to-date high less than a week ago. Copper and oil also fell in value.”
FTSE 100’s rebound on Monday was fuelled by the buying of heavily hit miners and overseas earners, including AstraZeneca, Unilever and GSK.
InterContinental Hotels Group was the top riser, adding 2.7%.
Endeavour Mining was the top faller at the time of writing, down 3%, but was well off the lows of the session. The same could be said of Fresnillo that was down 2.7% at the time of writing.
Housebuilders were marginally higher after Nationwide said UK house prices rose 1% in the year to January.
“Today’s modest rise in UK house prices points to underlying resilience, but momentum remains constrained by affordability pressures and a ‘higher for longer’ interest rate backdrop,” said Daniel Austin, CEO and co-founder at ASK Partners.
“While recent rate cuts signal easing inflation, they are unlikely to transform market conditions overnight. Mortgage pricing has improved, yet buyer and developer confidence remains fragile following a Budget that offered little direct stimulus for housing.”
Persimmon rose 0.7% while Barratt’s added 0.1%.
Continued volatility
One would expect the session to remain choppy, with markets still pondering the implications of Kevin Warsh taking over from Jerome Powell as chair of the Federal Reserve, and Trump’s nominee set to shake up traditional thinking on the central bank’s approach to monetary policy.
“Markets tend to talk about new Fed chairs in terms of “hawk versus dove,” but that framing misses the shift a Warsh Fed would represent,” explained Lale Akoner, global market analyst at eToro.
“This wouldn’t be a tightening shock, nor a return to ultra-easy policy. Rates could still move lower, with one or two cuts likely, but the bigger change would be in how support is delivered. A Warsh Fed would rely less on balance-sheet expansion and heavy forward guidance, and more on market pricing, private capital, and fundamentals.”
In addition to considerations around the new Fed chair, geopolitical risks haven’t gone away and are likely to drive trade later in the week.