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FTSE hits 3 week low as Jackson Hole approaches

Article By: ,  Financial Analyst
August 30, 2012 5:45 PM

The FTSE 100 suffered a third consecutive bearish trading session on Thursday as investors continued to sell out of heavyweight miners.

The FTSE 100 closed at 5719, with a loss of 24 points or 0.5%.

The FTSE 350 mining sector lost over another 2% in trading today and proved to be a big drag on the UK Index. The sector itself has lost 9% in the last two weeks alone and this is proved to be a handicap on the FTSE 100 as concerns over global growth and impending stimulus convince investors to downsize their risk exposures. Stocks such as Kazakhmys, Anglo American, BHP Billiton and Vedanta Resources were all pulled lower by effect, losing between 3% and 5% on the day to top the fallers list for blue chip stocks on the FTSE.

The movement in individual mining share prices has closely tracked a similarly bearish move in metal prices, where iron ore prices traded close to three year lows on fears over slowing demand in the midst of weak global growth and activity in China.

Indeed one of only two stock sectors to rally today was tobacco firms, which is a typical defensive sector. Alongside tobacco firms was a stronger US dollar also and this emphasised the risk off tone to trading today.

The stage is now set for Ben Bernanke in Jackson Hole, Wyoming at the annual economic symposium sponsored by the Federal Bank of Kansas City, to deliver the Fed’s plans to spur slowing growth in the US. The speech will be watched widely by investors both in the US and Europe, with its effects likely to be felt on the stock markets on either side of the Atlantic.

With optimism at high levels towards further stimulus from central bankers, the markets are at risk of an anti-climax to come from tomorrow’s speech. Will Ben Bernanke simply toe the same line of the Fed in the recent FOMC minutes which said they were ready to act if the economy deteriorates? Time will tell.

There are also eyes in Europe on whether Mario Draghi is preparing the ground for a fully fledged pledge by the ECB to buy Spanish and Italian sovereign bonds to prevent a further deterioration in the European debt crisis. The 6 September ECB meeting is being quickly highlighted as the platform to announce what the markets are now convinced Draghi is working towards. His decision to not go to Jackson Hole this week for ‘work reasons’ has only amplified that likelihood. Again, the markets are at risk of disappointment here is Draghi fails to deliver for a second month running.

And so the stage in Jackson Hole is set for an interesting trading day tomorrow. Enter stage left Ben Bernanke.

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