- Central banks in China, US and Europe expected to act
- UK manufacturing beats expectations
- Fresnillo leads miners higher
Stocks markets in the States may have been closed for Labour Day but that didn't stop bourses in Europe from registering decent gains on Monday, with London's Footsie starting the week strongly, up 0.82 per cent on the day.
"Despite continued poor economic data from China, as well as Europe, investors appear to be taking comfort from the fact that this is likely to make further monetary easing more likely in the near term, thus supporting asset prices," said market analyst Michael Hewson from CMC Markets.
According to a monthly survey by HSBC, the China manufacturing purchasing managers' index (PMI) dropped from 49.3 in July to 47.6 in August, its lowest reading since March 2009. The news follows the official PMI data from last week which fell to a nine-month low of 49.2. Any figure below 50 indicates a contraction.
"However, the data does suggest that Chinese policymakers have plenty of room to promote easing tools to spur growth and have previously this year re-armed the country by cutting rates. As such, hopes that China will soon have no choice but to stimulate growth have been the main driver of today's gains," said market strategist Ishaq Siddiqi from ETX Capital.
The UK's own manufacturing data beat expectations last in August, though it still posted its fourth straight month of contraction. The manufacturing PMI rose to 49.5, from 45.2 in July, a four-month high and better than the 46 reading expected by analysts.
Nevertheless, the focus of the markets this week will undoubtedly be on the European Central Bank (ECB) monetary policy meeting on Thursday at which President Mario Draghi is widely expected to unveil plans for buying sovereign debt in order to bring down bond yields in peripheral nations.
Following on from last week's climax of the Federal Reserve Chairman Ben Bernanke's closely watched speech at the Jackson Hole symposium, markets widely believe that further quantitative easing (QE) is now on the cards for the central bank's next meeting on September 13th and 14th. A close eye will be keep on the upcoming payrolls and manufacturing figures due out this week in the US, which will likely be the deciding factor in whether the Fed pulls the trigger or not.
FTSE 100: Miners gain on stimulus hopes
A strong showing by the miners assured that the Footsie was firmly in the red on Monday afternoon in spite of some steep falls for some heavyweight stocks, such as Glencore, Admiral and ARM Holdings. Disappointing Chinese economic figures, which usually results in a sell-off in the mining sector, had the adverse effect today as speculation mounted that Chinese policy-makers would act to stimulate the world's second-largest economy, one of the biggest sources of demand for the miners.
Meanwhile, precious metals peers Fresnillo and Randgold were among the highest risers on hopes that silver and gold prices
(dollar-denominated commodities) will rise as the US dollar
weakens after the potential launch of QE3. Other miners, such as Vedanta, Kazakhmys and Rio Tinto, also finished the day with decent gains.
However, Glencore was bucking the trend on the back of rumours that it will be sticking to its original offer for mining group Xstrata in spite of growing opposition to the terms. Qatar Holdings, which owns around 12% of the group, confirmed last week that it would vote against the merger at the shareholder meeting on Friday.
Car insurance giant Admiral was under heavy selling pressure on Monday afternoon after Credit Suisse downgraded its rating on the shares
from 'outperform' to 'neutral', saying that there isn't much upside left in the stock. Canaccord Genuity also downgraded Admiral to 'sell' today, while Exane BNP Paribas reiterated its 'underperform' recommendation.
Chip group ARM Holdings was also lower after Deutsche Bank downgraded its recommendation from 'hold' to 'sell'. "Despite reflecting many of ARM's long-term growth drivers such as rising royalty rates and penetration of new markets in our model, we expect ARM's [earnings per share] growth to slow down to mid-teens," said analyst Kai Korschelt.
FTSE 250: Talvivaara gains after reassuring investors
Finnish zinc and nickel mining company Talvivaara was a high riser after it denied it will be cutting jobs as part of a cost savings plan. Rumours had been circulating that the low price of nickel would force a reduction in headcount.
Shares in Lonmin, one of the world's biggest platinum producers, rose on after reports the firm had agreed details of a wage deal with striking miners. Work on the company's Marikana project in South Africa has been at a standstill for three weeks after a pay dispute turned violent, culminating in a bloody showdown with police that left 34 miners dead.
Africa-focused oil group Ophir Energy rose after significantly upping estimates of potential resources at one of its sites in Tanzania.
Meanwhile, house-builders were on the up after Panmure Gordon today lifted its target prices across the sector. Barratt Developments, Taylor Wimpey and Bovis Homes all benefitted from the forecast change.
FTSE 100 - Risers
Fresnillo (FRES) 1,627.00p +4.23%
Kazakhmys (KAZ) 610.00p +2.87%
Vedanta Resources (VED) 892.00p +2.82%
Sage Group (SGE) 303.50p +2.46%
Wolseley (WOS) 2,602.00p +2.36%
BT Group (BT.A) 222.50p +2.25%
Rio Tinto (RIO) 2,795.50p +2.19%
Hargreaves Lansdown (HL.) 633.00p +1.93%
Next (NXT) 3,644.00p +1.93%
Tullow Oil (TLW) 1,389.00p +1.91%
FTSE 100 - Fallers
Admiral Group (ADM) 1,150.00p -3.04%
ARM Holdings (ARM) 559.50p -2.53%
Aggreko (AGK) 2,337.00p -0.97%
Morrison (Wm) Supermarkets (MRW) 278.20p -0.64%
Ashmore Group (ASHM) 327.00p -0.61%
Resolution Ltd. (RSL) 214.60p -0.56%
Kingfisher (KGF) 274.10p -0.54%
Xstrata (XTA) 947.20p -0.53%
Severn Trent (SVT) 1,726.00p -0.29%
ICAP (IAP) 316.90p -0.25%
FTSE 250 - Risers
Talvivaara Mining Company (TALV) 140.00p +11.64%
Barratt Developments (BDEV) 158.60p +5.73%
Persimmon (PSN) 734.00p +5.16%
Centamin (DI) (CEY) 83.25p +4.72%
Soco International (SIA) 351.50p +4.36%
Bovis Homes Group (BVS) 492.60p +4.10%
Hochschild Mining (HOC) 450.00p +4.05%
Taylor Wimpey (TW.) 53.25p +3.90%
Ophir Energy (OPHR) 586.00p +3.81%
Phoenix Group Holdings (DI) (PHNX) 507.50p +3.57%
FTSE 250 - Fallers
CSR (CSR) 310.00p -4.79%
Bumi (BUMI) 303.20p -4.65%
Petra Diamonds Ltd.(DI) (PDL) 101.70p -2.68%
Menzies(John) (MNZS) 613.50p -2.62%
Redrow (RDW) 151.10p -2.58%
Cape (CIU) 237.00p -2.23%
Heritage Oil (HOIL) 190.10p -2.01%
Kentz Corporation Ltd. (KENZ) 390.10p -1.86%
Henderson Group (HGG) 104.20p -1.79%
PayPoint (PAY) 705.00p -1.67%