The FTSE 100 was supported by stronger miners on Monday after Chinese economic data boosted natural resources. Melrose was again the biggest faller after RBC analysts cut the stock to ‘underperform’.
Miners were due a rebound and the catalyst came from Chinese inflation data which showed consumer prices moved out of deflation in August.
Fresnillo was the FTSE 100’s top riser gaining 6%. Antofagasta rose 3.9% and Rio Tinto added 3.6%.
The FTSE 100 was dead flat at the time of writing after early gains faded.
“The FTSE 100 was firmly on the front foot on Monday, with the miners doing the heavy lifting as consumer prices in China edged into positive territory,” says AJ Bell investment director Russ Mould.
“The reading, which emerged over the weekend, implies an improvement in the commodities demand picture and in turn provides a boost to the resources sector.
“US inflation numbers and the latest decision from the European Central Bank dominate the agenda over the remainder of the week, before the Bank of England and Federal Reserve take centre stage next week. This could be a defining period for stocks as we get some clarity on whether the rate hiking cycle is truly at or near its end or if there is more work to do in the battle against inflation.”
There was little evidence of major positioning in UK stocks on Monday as volatility remained low. That said, as the week progresses and more traders return to their desks after the summer holidays, one would expect sharper moves in stocks.
The US will release CPI data this Wednesday. This singular data point has the potential to spark a move in markets this week as investors react to interest rate expectations.
The Federal Reserve is expected to pause rate hikes this month and markets have priced this in accordingly. If we should see a stronger-than-expected CPI print on Wednesday it could be followed by disruption in global equity markets.
“The US is still in a hot air balloon scenario with strong demand in the economy risking keeping inflation elevated. With the number of Americans applying for unemployment benefits unexpectedly falling to the lowest level in 7 months , it’s adding to expectations that the Fed could raise rates again later this year after another pause this month,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.