Nikkei drop 4% to 8-month low
Asia commodity shares lower
FTSE still down despite mining rebound
House builders bought on the rumour sold on the news
Wolsey shares drop 10% on update
US stocks to open higher before consumer confidence data
The big drop in Asia markets was largely a follow-through from the volatility seen in European basic resource company shares on Monday. Japan’s Nikkei dropped over 4% to fresh 8-month lows. Singapore-listed Noble Group dropped 15% in the aftermath of fellow commodity trading company Glencore (LONDON:GLEN) shares losing almost a third in value. The Bank of India sent a clear message that it expects growth to slow further across Asia by cutting interest rates by a surprise 0.5% to 6.75% from 7.25%.
There is still a bit of residual shell-shock in the FTSE 100 in the wake of massive 25% plunge in Glencore shares on Monday. Short-covering has prompted a dead-cat bounce across the commodities space but there isn’t the confidence to invest in some of the less beaten down areas of the market.
Oil & gas shares were higher. Investors in Royal Dutch Shell (LONDON:RDSa) put the dry Artic oil well behind them as the share price rebounded 2.5%. The reaction was slightly more lacklustre with BP (LONDON:BP) shares up less than 1% after oil giant announced cost-cutting of 30% at its deep sea oil project.
UK mortgage approvals increased to a 19-month high in August. The number of approvals was 71k, higher than the 69.8k expected and prior 68.8k. House building shares had front-run the mortgage data with gains on Monday so the likes of Barratt Developments (LONDON:BDEV) and Taylor Wimpey (LONDON:TW) fell back by around 2% when the data was reported.
A poorly received earnings update from Wolseley (LONDON:WOS) sent shares sliding over 10% to the bottom of the index. The company lowered its revenue forecast on expectations of slower manufacturing growth in the US. The 10% drop is probably an over-reaction. The trouble is that volatility breeds volatility. When Glencore stock plunges 27%, it creates an expectation that there could be a double digit drop on any company news.
US stocks look set to recover on the open ahead of consumer confidence figures following the crash in biotech stocks on Monday that took the S&P 500 below 1900.
USA pre-opening levels
S&P 500: 7 points higher at 1,888
Dow Jones: 42 points higher at 16,042
Nasdaq 100: 20 points higher at 4,123.
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