The FTSE 100 edged higher on Monday in tentative trade as investors awaited further geopolitical developments and geared up for the US earnings season.

The FTSE 100 was up 0.3% to 7,624 at the time of writing on Monday.

“A mute start to the week for European indices suggests a sense of nervousness, particularly as the US reporting season gets underway and investors worry about a cautious tone in corporate outlooks,” said Russ Mould, investment director at AJ Bell.

“The FTSE 100 was flat…with strength in retail and mining stocks offset by weakness in pharmaceuticals amid negative read-across from Pfizer’s weak update.”

Investors are preparing for earnings updates from US companies including Tesla, Netflix, Goldman Sachs and Morgan Stanley this week.

Geopolitical risks

Natural resources companies were among the FTSE 100 top gainers on Monday as the human tragedy in the Middle East supported commodity prices.

“As risk-off sentiment has been spreading, investors have been seeking more defensive positions amid fears of conflict escalating in the Middle East,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Investors are braced for volatility ahead amid fears that Hezbollah militants could attack Israel over its operations in Gaza as forces ready for invasion.”

BP and Shell added a significant number of points to the FTSE 100.

St James’s Place was the top riser, up 3%, with a small bounce back from Friday’s crash.

Ocado shares were down 5.3% at the time of writing on Monday and were the biggest faller.

“Ocado fell after a broker downgrade on the stock, citing concerns about delays to rolling out new fulfilment centres and competition for warehouse automation systems intensifying,” said Mould.

Premier African Minerals has been very quiet when it comes to the grades of lithium at their Zulu project in Zimbabwe. Under the terms of the offtake agreement with their Chinese partner Canmax, Premier African Minerals is required to supply lithium with a grade close to 6%.

Throughout the Canmax saga, attention was focused entirely on contract negotiations and whether Premier African Minerals would be forced to repay the prepayment amount.

Canmax proved to be supportive of Premier African Minerals and was forthcoming with renegotiating their offtake agreement. The terms, however, leave Premier African Minerals little room for error.

The company must achieve 1,000-tonne production per month by the end of November or face penalties including cash payments – and even the transfer of an interest in the Zulu project to Canmax.

While the focus has been on the production figures, we are yet to hear anything material on the grade of the offtake since operations recommenced at Zulu.

Earlier in 2023, Premier African Minerals said they were unable to produce the required lithium grades above 6% at Zulu without the use of reagents.

Premier must produce lithium with grades close to 6% under the terms of their offtake agreement. Failure to do so at the specified quantity will trigger penalties.

Grades can be released alongside shipment announcements and any upcoming announcement will be crucial for Premier African Minerals shares.

For example, Core Lithium announced its first lithium shipment from the Finnis project had a 5.6% grade shortly before the shipment was made in May this year. Core Lithium shares reacted positively in the immediate period.

Sayona Mining enjoyed a pop after announcing the production of 30,000 tonnes of saleable lithium concentrate at 5.5% before shipments commenced over the summer.

Premier African Minerals shares have been stuck in a tight range since the new agreement was inked with Canmax. The announcement of lithium grades will likely be a catalyst for PREM shares to break out of this range.

Expect a sharp decline in PREM shares if the Zulu grades are less than 5%. However, if this is the case, it is unlikely Premier African Minerals will reveal the exact grades.

Premier African Minerals shares are down 52% over the past six months.