FTSE 100 Rallies 1% on Chinese Yuan News

Posted on | June 21, 2010 |

The move by China over the weekend to make the Yuan more flexible is a move towards market normalisation and this is being welcomed by investors.

The move was a bit of a surprise, and so naturally we have see a bit of a knee jerk reaction in the US dollar, which has fallen against a basket of currencies, whilst equities have traded largely positively with a higher demand for risky asset classes.

Given the amount of criticism Beijing has faced recently for continuing to peg its currency against the US dollar and thereby creating an unfair global trade imbalance, it seemed only a matter of time before the PBOC started to make its currency more flexible. The timing of the announcement is clearly a move to calm the likely US vigour ahead of the G20 meeting this weekend.

Much of the buying we have seen is centred on the miners. This is purely on the back of the move by China which has invigorated appetite for risk and a weakening of the US dollar. Copper prices have surged in early trading and this has followed through to mining stocks.

The top 8 risers on the FTSE 100 are all miners which speaks volumes as to where the energy is behind today’s gains in the UK’s benchmark Index.

BP Shares Fall Again

BP shares sold off by over 4% on Monday, after Anadarko accused the firm of being reckless and speculation that it could launch a legal case to refrain from paying its share of the spill costs.

BP’s shares could well bounce around like a cork in a bath for sometime now, with investors highly sensitive to any news over the spill, liability costs and fund raising.

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Spread Betting and CFD comments by Nick Serff, Market Analyst, City Index.

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