FTSE falters after Fed but gold shines as dollar falls
London (Sept 18) Janet Yellen’s concerns about the Chinese economy has undermined leading shares, despite the Federal Reserve chair announcing on Thursday that US interest rates would remain on hold.
The worries about the outlook for the global economy have pushed mining shares lower, although precious metal miners are shining on hopes that the Fed decision will weaken the dollar - which is already happening - and lift gold prices.
So Randgold Resources has risen 118p to £38.47 and Fresnillo is 17p better at 607p.
But Glencore - which recently unveiled a £1.6bn share placing to help reduce debt - is down 2.75p to 129.4p as Exane BNP Paribas cut its target price by 20% to 200p. Glencore was also criticised by the Investment Association and the National Association of Pension Funds for placing shares with a select group of institutions rather than giving all existing investors the option to increase their stakes.
Exane also downgraded Rio Tinto, down 8p at 2333.5p, and Anglo American, 4.4p lower at 731p.
Ferrexpo has slumped 30% to 41p after the iron ore company’s transactional bank F&C Bank - controlled by the the group’s major shareholder Kostyantin Zhevago - was declared insolvent in Ukraine. The company said its operations were not currently affected but said that $174m of its total $280m cash balances was held at F&C. Cantor Fitzgerald analysts said:
While the group’s operations are reported to be unaffected, this development clearly casts some uncertainty on the company’s financial position, and rather tempers the positive news yesterday of the Ukraine receiving a $500m loan from the World Bank to finance its ongoing Financial Sector Development Policy.
Yuen Low at Shore Capital said:
Clearly, this is potentially very bad news and we expect Ferrexpo’s shares to crater today as a result, despite Ferrexpo’s reassurance that operations “are not currently affected.
Elsewhere AstraZeneca has added 73p to 4343.5p after traders suggested that positive results from Eli Lilly’s diabetes treatment could also boost the company’s rival Farxiga pill.
Overall the FTSE 100 is down 19.95 points at 6167.04, while German and French markets are down nearly 1% as the dollar weakens against the euro and puts pressure on European exporters. Brenda Kelly, head analyst at London Capital Group, said:
Uncertainty prevails and choppiness is the only certain result. Deflation is a concern. China is a concern, and oil prices look set to take another leg lower.
Amid the uncertainty utilities are in demand for their status as havens. National Grid is 1.3p better at 851.9p and United Utilities is up 6p at 885.5p.