Investment market update
UK stocks have opened lower this morning, tracking a negative close on Wall Street and weak trading in Asian stocks overnight.
All major indices ended lower as a sell-off in mining related shares and concerns over a Chinese economic downturn led global markets lower. Glencore fell 29% – its biggest one-day drop – after Investec raised doubts over the mining and commodities company’s valuation and high debt levels.
India’s central bank lowered interest rates more than expected to bolster the economy. Governor Raghuram Rajan cut the benchmark repurchase rate to 6.75% from 7.25%, the Reserve Bank of India said in a statement in Mumbai on Tuesday, the lowest since May 2011. The move was predicted by only one of 52 economists in a Bloomberg survey.
The Federal Reserve will probably raise interest rates later this year and tighten policy gradually thereafter, New York Fed President William C. Dudley said, echoing the sentiment of Chair Janet Yellen that an uncertain global outlook won’t postpone lift-off into 2016. “The economy is doing pretty well,” Dudley said Monday at an event hosted by the Wall Street Journal in New York. “My expectation is that we probably will raise interest rates later this year.”
Glencore’s fall in London reverberated around Asia as Australian miners BHP Billiton Ltd. and Rio Tinto Group declined with trading companies including Noble Group Ltd. PetroChina Co. was among Chinese oil explorers caught up in the sell-off as trading resumed after a holiday. Glencore fell by a record in Hong Kong, tracking London shares, as concern mounted about the commodity trader’s debt load.
Oil traded below $45 a barrel as investors await data that may signal the strength of demand in the world’s two biggest consumers. Crude oil’s rally is faltering as China’s economy slows and US stockpiles remain almost 100 million barrels above their five-year average for this time of year. The commodities issue has forced Royal Dutch Shell Plc to abandon its $7 billion search for oil in Alaska.