US Markets and Commodity Trading

Posted on | October 7, 2009 |

The Dow was unable to maintain yesterday’s upward trajectory when Wall Street opened for trading today. The US index had had 0.22% shaved off by 3.30pm in London, just as the third-quarter earnings season is set to kick off stateside.

Investors will be apprehensive and want to see evidence that recent gains can be supported by decent corporate earnings. Expectations are fairly positive, but the market will require proof once companies begin reporting.

The aluminium producer Alcoa, which reports its results at the end of trading today, gained 1.22% by 3.30pm in London. The company is expected to report a loss, but analysts at both Credit Suisse and Deutsche Bank today suggested it was a good buy at current levels.

Coca-Cola was up 1.23%, also on the back of a Deutsche Bank upgrade; the investment bank raised it to ‘buy’.

The other major gainer today was Bank of America, up 1.12% in early trading. The bank, which looks ready to replace outgoing CEO Ken Lewis imminently, seems set to benefit in the medium term from increased activity in capital markets, as well as more mortgage and credit card applications.

At the other end of the leader board, AT&T lost 3%. The company announced that it would allow voice calls on Apple’s iPhone, potentially opening the gateway for services such as Skype.

Boeing was also down in early trading, dropping 1.66% as it announced that it would delay the first flight and delivery of its 747-8 freighter, blaming high production costs and unfavourable market conditions.

Oil prices dipped slightly ahead of the weekly inventories data from the US, with Brent Crude trading at around $68.6 per barrel. While a surprise drop in inventories bumped the price last week, analyst expectations are once again for an increase this week.

Gold prices furthered their record-breaking rally today, hitting an intraday high of $1,050 per ounce and stretching to a 19.3% gain for the year. The catalyst for the strong performance seems to be continued weakness for the Dollar, as analyst speculation today cast doubt on the long-term role of the currency in worldwide oil trading.

Another under-pressure currency was Sterling which, according to the central bank’s trade-weighted Sterling index, reached its lowest level since April. The Pound was hit by a report on corporate profitability from the Office for National Statistics showing a serious decline, particularly for the manufacturing sector. Oil and gas companies’ rate of profitability was halved to 33.6% from 72.4% a year ago.

By Anthony Grech, Research Analyst, IG Index.

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