Interactive Investor

Glencore leads FTSE 100 to six-week high

5th October 2015 16:08

Lee Wild from interactive investor

Less than a week ago the FTSE 100 was pinned below 5,900 and a further plunge into the abyss looked very likely. Now, a three-day winning streak appears odds-on to become four, and the index is up over 400 points at its highest since 21 August. Once again, it's the Glencore effect which is spearheading the Monday rally.

All the talk is of large asset disposals to reduce its debt mountain, but Glencore has already said it's selling bits of the business to cut borrowing by $10.2 billion. However, a share price rally of 71% in Hong Kong overnight and spike in trading volumes forced the company to issue an announcement at the request of The Stock Exchange of Hong Kong.

"Having made such enquiry with respect to the company as is reasonable in the circumstances, the board confirms that it is not aware of any reasons for these price and volume movements or of any information which must be announced to avoid a false market in the company's securities," it said.

And in a classic case of great timing, one of Glencore's non-executive directors is sitting on a small fortune. On Thursday, Bill Macaulay, who also owns US private equity firm First Reserve (FR), bought 1.7 million shares in the bombed-out miner at 90.91p each.

Glencore shares traded as high as 114p Monday, giving Macaulay a paper profit of £392,500. And we said on Friday that Macaulay is "worth watching".

FR invested heavily in Glencore via a convertible bond in 2009, two years before the company floated at 530p. He sold at 278-302p earlier this year then, in June, offloaded his last 34.3 million shares at an average price of 278p. Four months later they were worth as little as 66p.

Elsewhere, Lloyds is better after the government said it will sell a £2 billion to retail investors in the spring. But its heavyweight miners Rio Tinto, Antofagasta and Anglo American which are streaking ahead, helping propel the FTSE 100 up 156 points at 6,286.

Another increase in the oil price has also put BP and Shell toward the top of the leader board - events in Syria make ugly reading, although with the Saudis still prepared to defence market share with high production, a sustainable rally will be difficult.

Early afternoon Monday there was not a single loser in the top flight. The rally which followed Friday's jump on terrible jobs data clearly continues. Non-farm payrolls were up just 142,000 in August, way shy of the 201,000 predicted. Previous months were revised down, too. That, however, at least implies US interest rates may stay lower for longer, typically a good thing for equities.

Odds of a December rate hike are now put at just 31%."We need to go out to at least March 2016 before the market prices a 50%+ probability of a hike," says Deutsche Bank strategist Jim Reid.

A weaker dollar could help emerging market economies where a lot of asset managers are invested. Mid-cap Ashmore and blue chip Aberdeen Asset Management are racing higher.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.