FTSE 100 preview: Stronger commodity prices to prop up index

on Aug 22, 2017

Britain’s blue-chip index looks set to open higher this morning, with stronger commodity prices likely to prop up sentiment. In company news, BHP Billiton (LON:BLT) has updated investors on its full-year performance, signalling that it will offload its US shale assets.

IG’s opening calls suggest that the FTSE 100 will start the session 27 points higher at 7,346. The miner-heavy index is likely to take cues from Asia, where stocks have advanced this morning finding support in a rise in resource prices.

“Commodity prices are holding firm, particularly base metals,” Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong, told Reuters, adding, however, that commodities had mostly firmed “on speculative Chinese investment flow from the wealth management industry, so we question the real demand”.

In the US, stocks closed mostly higher last night, although gains remained capped amid a selloff in tech and financial shares.

“Historically, tech and financials trade together. You could be seeing that correlation come back,” said Mike Bailey, director of research at FBB Capital Partners, as quoted by CNBC. “I think the short-term is increasingly uncertain without too many positive catalysts out there.”

The FTSE 100 started the week little changed yesterday, shedding 5.10 points to close 0.07 percent lower at 7,318.88, also pressured by a drop in financials which retreated on the back of geopolitical tensions.

Today’s macroeconomic releases include the German ZEW index for August due out at 10:00 BST. On the corporate front, Persimmon (LON:PSN) and Antofagasta (LON:ANTO) are scheduled to post results today. Sydney- and London-listed BHP meanwhile said that it was ‘actively pursuing options to exit’ its US shale business. The move will come amid shareholder pressure for the Anglo-Australian mining giant to overhaul its business.