London midday: Commodities weigh on equity gains, further gold and oil downside eyed

Softness in commodities markets were limiting gains on equities come midday in London, with some traders pointing out there was still margin for further downside moves in the likes of oil or gold, as investors monitored events in Greece.

That followed a wave of selling in gold during Asian trading hours which saw trading volumes spike and futures prices drop almost 4%, with technical analysts telling Sharecast there was still room for further losses in the near-term.

Trading volumes on the Shanghai Gold Exchange spiked on Monday to reach approximately 900,000 lots on a key contract. In comparison, less than 27,000 lots changed hands on 17 July. The average volume thus far in July had been less than 30,000 lots, according to Bloomberg data.

In Greece, banks reopened their doors earlier in the day as limits on cash withdrawals were relaxed slightly as the country prepared to pay back €3.5bn owed to the European Central Bank and falling due later today. The Athens stockmarket remained closed, however. Ordinary Greeks would need the extra cash to pay for the increase in value added tax which went into effect from Monday, from 13% to 23% on items such as taxis and restaurant meals.

As of 12:00 the Footsie was trading points 16.82 points higher to 6,779.92 and the FTSE 250 up by another 9.40 points to 3,700.82.

Front-month Brent crude futures were lower by 0.617% to $56,75 per barrel on the ICE. In parallel, gold futures for August delivery on COMEX were losing 1.58% to $1,114 per ounce.

On a positive note, speaking overnight German Chancellor Angela Merkel said she was open to extending the maturity and lowering the interest Greece pays on its debt. However, in her interview with ADR TV she was clear that debt write-downs could not be fathomed.

Further downside eyed in gold and oil markets

Technical analysts pointed out how Monday’s intra-day low in spot gold prices, at $1,072.93 per ounce, coincided with the 50% retracement of the move higher during the ‘super-cycle’ which began in August of 1999. If that support failed to hold a move towards $900 per ounce might be on the cards, they added.

In parallel, the latest positioning data from the US CFTC revealed the number of hedge funds with reported positions were now unusually short oil futures. The market had not been that ‘bearish’ on oil since March 2014, one trader pointed out to Sharecast.

Nevertheless, so-called technical indicators were still pointing towards a bias for further downside in US crude futures, possibly to as low as $47 per barrel, he went on to explain.

If you cant beat 'em, buy 'em: Aveva rockets on M&A

Shares in Aveva were up by more than a quarter after engineering design firm Schneider Electric said it would acquire the firm in a reverse takeover deal, beating out rumoured rivals Emerson and General Electric.

Barclays was reportedly planning to cut more than 30,000 jobs in the next two years, just days after the bank ousted chief executive Antony Jenkins. The cuts – which are seen as the only way to address the bank’s underperformance and lift its share price – could take the bank’s global workforce to below 100,000 by the end of 2017.

Tullow Oil said gas export from the Jubilee Field to the Ghana Gas plant at Atuabo has been suspended since 3 July due to technical issues and is expected to resume mid-August.

Aerospace and defence company Rolls-Royce announced two new deals worth more $2.23bn. The company has been selected by the national carrier of Saudi Arabia to provide long-term TotalCare engine service support, while International AirFinance Corporation has also signed it up to provide Trent 700 engines for 20 Airbus A330 Regional aircraft.

Standard Chartered announced a radical management shake-up designed to restore the fortunes of the bank.
Under the new regime, chief executive Bill Winters will take more responsibility as all heads of business units will report to him not his deputy Mike Rees, the bank said in an announcement. The restructure formed part of a previously announced goal of $1.8b in savings by the end of 2017.

British Land said it had a good start to the year, with strong occupational demand and lettings well ahead of estimated market rental value. In its first-quarter trading update, the company said its Leadenhall Building, also known as the Cheesegrater, is now 90% full, with 107,000 square feet of new lettings and 52,000 square feet under offer.

Market Movers
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FTSE 100 6,789.78 +0.22%
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ARM Holdings (ARM) 1,026.00p +0.79%

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Randgold Resources Ltd. (RRS) 3,858.00p -3.65%
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Pearson (PSON) 1,258.00p -1.33%
Aviva (AV.) 531.00p -0.84%
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Intertek Group (ITRK) 2,416.00p -0.78%

FTSE 250 - Risers
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NMC Health (NMC) 839.50p +4.81%
Just Eat (JE.) 457.40p +4.45%
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Domino's Pizza Group (DOM) 801.00p +2.63%
OneSavings Bank (OSB) 300.00p +2.39%
Close Brothers Group (CBG) 1,552.00p +2.31%
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Centamin (DI) (CEY) 55.80p -5.34%
Tullow Oil (TLW) 268.30p -4.72%
Acacia Mining (ACA) 266.60p -3.75%
Petrofac Ltd. (PFC) 876.00p -3.36%
Nostrum Oil & Gas (NOG) 557.00p -2.79%
Kaz Minerals (KAZ) 189.40p -2.72%
Premier Oil (PMO) 139.50p -2.31%
Amec Foster Wheeler (AMFW) 799.50p -1.96%
Wood Group (John) (WG.) 599.00p -1.80%