FTSE Rallies As Glencore Sinks On DOJ Probe

The FTSE climbed steadily across the course of the day, helped northwards by commodity stocks as China, the world’s largest consumer of metals promised not to start a currency war. 

The improved sentiment on the market meant investors shrugged off falls in Asia overnight, troubles for Glencore and a stronger pound. After shedding 1.2% in the previous session, the FTSE has managed partially claim back those losses whilst finding support at 7600.

Glencore Slumps As DoJ investigation Announced

Glencore was under significant pressure on Tuesday following news of a subpoena by the US Department of Justice over alleged money laundering. The overriding fear here is should any wrong doing be uncovered in Glencore’s dealings then the fine that could be sizeable. 

Just the sheer uncertainty of how large such a fine from the DOJ for the world’s largest mining company could be has been enough to for investors to sell out of the stock. Glencore is down over 5%, an improvement from the initially 11% loss earlier in the day.

The negativity surrounding Glencore has not transferred across to other miners such as BHP Billiton and Randgold Resources, which have gained ground, tracing metal prices higher.

US Crude Hits 7-month High Then Dives Lower

Oil stocks were initially offering support to the FTSE as US crude hit $75 per barrel for the first time since 2014. The price of oil sky rocketed as traders grew increasingly concerned over an oil shortage amid supply issues in Libya and Canada. 

These issues come at a time when sanctions on Iran are looming and politics in Venezuela are also impacting supply. Whilst OPEC and Russia eased the output production cuts in order to increase supply, it already seems that their efforts were too tame.

After a strong rally across the day, oil suddenly and sharply plunged over 1% although reason is unclear at the time of writing.

UK Construction PMI Hits 7 Month High

The UK construction industry continued to rebound in June, beating expectations with activity hitting a 7-month high. Construction pmi hit 53.1, ahead of May’s 52.5 and beating expectations of 52.5

After a snow disrupted April this is the third straight month of recovery in the construction industry, where house building was once again the star performer, propping up the sector as civil engineering projects continued to hold back growth. 

Whilst the construction sector is only a relatively small contributor to the UK economy, the good news has been enough to lift sentiment and boost the pound back towards $1.32. 

A better than expected reading in both the manufacturing & construction pmi usually bodes well for an encouraging print from the dominant service sector pmi tomorrow. Should this be the case, optimism for an August rate rise could start to increase potentially putting the pound on target for $1.33.