Factory activity in China shrank during September. On paper, this should mean a fall for basic materials companies, since it means lower demand from the country that is the world’s biggest consumer of raw materials. However, the reality is different since traders are now betting on the Chinese authorities offering some specific stimulus aimed at the manufacturing industry.
This optimism has temporarily boosted the Chinese markets, and since the FTSE 100 has heavy exposure to oil, gas, miners and luxury goods, the UK’s leading index enjoyed a boost and outperformed its European contemporaries.
Copper prices have risen slightly as traders look to short-cover their positions in anticipation of thin trading over the holidays. Glencore gained 5.3 percent after Citi opted to maintain its “buy” rating on the company. Investors were also pleased by the miner’s decision to cut jobs at its operation in South Africa, in a bid to reduce its mounting debts.
In response, Anglo American and BHP Billiton’s share prices gained three percent and 2.4 percent, respectively. Meanwhile, crude oil prices increased slightly, which helped to bolster the price of Tullow Oil by 11 percent, sending it up to the top of the FTSE 250, with many other oil companies also enjoying some price correction.