Glencore tumbles 30%
Investec issued a note this morning saying that should commodity prices continue to decline, shares in commodity companies, in particular Glencore (LON:GLEN), would be worthless.
Investors haven’t hung around to see if there is any weight to Investec’s view; the FTSE 350 Mining sector was down 8% by midday with Glencore trading below 70p, down over 30%.
“If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate,” analysts at Investec said in a note to clients.
The prices of commodities are approaching multiyear lows after a brief lull in selling. Many fear that if recent support levels are broken, the downward pressure on mining stocks could increase.
A Piece of London offers a slice of the property market
As the crowdfunding sector continues to grow, as does its inevitable expansion into property. With house prices rising year on year, especially in prime spots such as the City of London, property investment can be difficult to get into for the ordinary investor. However, property crowdfunding offers an opportunity to pool resources with others to buy into the market; a concept that is growing increasingly popular.
A Piece of London is one such property crowdfunding platform. They have just launched their first two projects, allowing investors to invest as little as £1000 in property in prime locations.
The process is simple. Using the online platform, investors choose a property, set up an account and invest the sum of their choice. Operating under FCA guidelines, A Piece of London will then do the hard work, putting the money together with that of other investors and creating a UK limited company that will then buy the property. A Piece of London then manages the property and divides the rent between the investors; in short, the model has the potential to make ‘buy to let’ a whole lot easier.
Unusually, A Piece of London operate a profit share model, meaning that they only make money from an investment if their investors do. According to them, this “completely aligns their interests with their investors”.
The company’s founder is Fintech entrepreneur Shailash Sanghrajka, who has spent the last 18 years atinvestment banks and hedge funds. He says:
“We want to open up the London property market and make it accessible to ordinary investors wanting to make smaller investments.
“Investors should have control over their investment choice, confidence of exactly what they are buying into and have their own sense of property ownership without the need for huge deposits, mortgages or the hassle of investing on their own.”
Projects include the famous development of Battersea Power Station and new property in Tooting Broadway, which is already nearly 50 percent funding. With estate agent Savills predicting that house prices will rise by 25% over the next five years, this could be an interesting opportunity to get a foot on the ladder.
For more information, visit apieceoflondon.co.uk
Miranda Wadham on 28/09/2015
Aldi UK to make the move online
Discount supermarket Aldi has announced plans to launch an online operation in the UK, offering home delivery and third party collection points from 2016.
The chain will initially begin selling crates of wine online, expanding to “special buys” in the spring. The privately-owned supermarket has continually beaten the performance of British supermarkets such as Sainsbury’s and Tesco, and the company believes moving online is the next logical step.
“This will enable us to introduce the Aldi brand and some of our best-selling, best-quality and best-value products to thousands more customers across the UK,” said Aldi Chief Executive Matthew Barnes.
“As the grocery market continues to evolve, our unique model, operational efficiency, private ownership and financial strength mean we’re able to keep investing in our business – from people and presence to products and prices.”
Aldi is now Britain’s seventh largest grocer with a 5.6 percent share according to market researcher Kantar Worldpanel. The company disclosed a 31% rise in sales to £6.9bn in the 12 months to 31 December; however, it noted that increased investments “in prices and people” saw operating profits fall to £260.3m from £271.4m.
Asian shares mixed on investor caution
Asian shares suffered another disappointing day on Monday, continuing from Wall Street’s uninspiring performance on Friday.
It was announced that the US economy grew faster than previously estimated in the second quarter of the year, as official figures were revised upwards from 3.7 percent to 3.9 percent. However, performance was lacklustre as investors remained cautious ahead of US jobs data due to be released later this week.
Asian shares had a mixed day on Monday, with Tokyo’s Nikkei index down 0.7%. Upcoming announcements, including industrial production data from Japan on Wednesday, and Thursday’s China Caixin Purchasing Managers’ Index (PMI) are likely to influence the markets throughout the week. Mainland Chinese shares followed the trend, opening lower after the latest in a string of disappointing economic data showed that industrial profits continued to decline in August. Industrial profits fell 8.8% from a year ago, a big increase on the 2.9% fall disclosed in July. The Shanghai Composite was down 0.2% to 3,085.86 in early trade.Bank of England says it sees further rise in house prices and notes EM risks.
The Bank of England has joined the Federal Reserve in noting risks from emerging markets such as China as a possible cause for further market volatility in the coming weeks.
Although the BoE pointed to possible risks from EM volatility, they said they had not yet seen any impact on the real economy.
In the Financial Policy Committee statement released this morning, the committee noted that China was in transition to a consumer-driven economy and they could be some teething problems during the shift and said there were a number of UK asset managers with significant holdings in Emerging Markets that could be impacted.
Later in the statement the release covered the resilience of the UK financial system and noted a rise in the average core capital ratios of UK banks, increasing their ability to weather any shocks.
The BoE also said that banks had increased overall lending by 3% in the year to Q1 2015, a positive sign for the UK economy.
In further optimism for the UK economy, the Bank of England said that it saw further house price inflation and limited risks to the overall economy if there was to be fall in house prices. In regards to the Buy-to-let market the BoE said; “Any increase in buy-to-let activity in an upswing could add further pressure to house prices.”
FTSE soars in broad based rally after Yellen comments
Markets cheered Janet Yellen’s press conference this morning after she clarified the Federal Reserve’s outlook on the economy and eased fears over a rate hike.
The key aspect of Yellen’s speech was her reduction in uncertainty of whether the Federal Reserve was going to raise rates whilst the economy faltered.
She reaffirmed the view that the Federal Reserve would only hike rates when the economy was strong enough to withstand a tightening in monetary policy.
Expectations of inflation and market volatility were also noted as the reason why the Fed held off raising rates last week, alleviating market fears that the Fed hadn’t hiked because they saw a softer US economy.
Whilst Yellen painted the picture of a Fed who were only going to hike into a strengthening economy, she did say that it was likely that rates would rise this year. These comments suggest rates were not raised last to give the FOMC time to judge any impact from the recent market volatility.
Markets took Yellen’s confidence of a 2015 rate hike as a sign that the underlying economy was strong and would support corporate earnings going forward.
The FTSE 100 was up over 2% in mid-morning London trade.
Volkswagen to elect new Chief Executive
The board of Volkswagen will meet today to choose a new Chief Executive after the company was hit by an emissions test scandal earlier this week.
Ex-Chief Executive Martin Winterkorn resigned on Wednesday. VW have been accused of rigging emissions tests in the US, with thousands of cars sending out diesel emissions considerably higher than found in tests.
Porsche Chief Executive Matthias Mueller is reportedly the front runner for the job, gaining the task of steering the company through what will arguably be the most difficult period in its history. Customers and car dealers have shown frustration at the lack of information on the scandal, and the new CEO will be given the difficult job of regaining consumer trust.
Both Europe and the US have started further enquiries, with the UK regulator launching its own investigation on Thursday.
Japanese shares end higher, Asia mixed
Japanese shares closed higher on Friday, as strong economic data pulled its market up from a 3 percent loss the previous day.
Japan’s Nikkei index ended a volatile day up 1.8 percent after data showed Japan’s core consumer prices had dropped for the first time since the Japanese Prime Minister Shinzo Abe began his stimulus programme.
The CPI, which includes oil but not fresh food prices, decline 0.1 percent on a year ago. Asian markets were hit by the news earlier this week that China’s factory activity has fallen to its weakest since 2009.
However, home prices have risen for the fourth consecutive month, signaling growth in the country.
The Shanghai Composite fell 1.5 percent, with the Hang Seng closing up 0.1 percent.
The FTSE 100 rallies after strong Eurozone PMI, commodity stocks lead gains
The FTSE 100 recovered some of the ground lost yesterday as commodity related companies pushed higher.
Miners in particular were heavily hit yesterday on fears of a Chinese slowdown and a raft a downgrades in the sector.
Despite last night’s dismal Caixin Manufacturing PMI release, mining stocks rallied in a form of ‘sell the rumour, buy the fact’ rebound.
Oil related companies also rallied in tandem with the underlying price.
“There’s a bit of support coming through the oil price, which is acting as a trigger for the FTSE to reclaim some ground,” said Hantec Markets’ analyst Richard Perry to a Reuters reporter.
Adding to the risk on mentality was strong manufacturing data from the Eurozone which investors cheered after the poor gauge of factory activity from China.
Regardless of today’s rally, some analysts still the FTSE 100 in a technically bearish formation and feel the lows of 5768 could well be tested unless the FTSE 100 can make a break above 6250.
Chinese Manufacturing PMI drops to 6 1/2 year lows
Chinese factory activity has slowed once more in an early indication of Manufacturing PMI.
Most components of the index slowed and worryingly, at faster pace than last month’s reading.
The Caixin Manufacturing PMI came in at 47.0, well below analyst estimates of 47.5. Last night’s reading was also the lowest for 6 ½ years.
The Caixin Manufacturing PMI recently replaced ‘HSBC PMI Manufacturing’ and is an early indication of Manufacturing PMI, with only a small proportion of purchasing managers being surveyed.
The news came a day after the Asian Development Bank lowered its Chinese GDP growth target to 6.8%, below the government’s 7% official target.
The latest reading on the Chinese economy will do nothing to ease investor fears of a slowdown in the world’s second largest economy as the economic picture gradually deteriorates.
Oil and copper dropped to session lows in Asian trading following announcement as traders priced in lower demand for major commodities.
The next installment of PMI figures is on 30th September when we will receive the final reading of Caixin Manufacturing PMI and the government’s official reading of PMI, which may provide some respite for equity bulls as the governments reading is usually higher than Caixan’s reading.