Mining stocks weigh FTSE

The FTSE is looking as if it could revisit the dip in mid September if the current sell off continues. The London share index clocked a 1.15% decline Friday, more than most other European and US indices, as the sell off in US government paper continues. Mining firms were the worst hit and although technically the trigger for the fall came from a decline in copper prices, mining shares did far worse than commodities, as was the case for Antofagasta. The Chilean copper miner lost 5.15% on the day compared with a 0.5% drop in the copper price as the frenzy being whipped up by a rise in US bond yields is leaving investors uncertain about where to go next. The perceived-as-risky mining shares are not in favour at the moment; instead more stable, less risk averse assets are benefiting from the changing preferences, including gold and utility stocks.

US yield rise continues as job market shows strength in economy

Treasury yields are rampaging higher, encouraged by strong US economic data showing a labour market that is not far from full employment and the unemployment rate dropping to the lowest level in almost 50 years. The preliminary figures from the US Labor Department showed that fewer jobs were created in September compared with August but a revised and final number will be released with the next set of data in October and it could still show a more significant increase than today, as it did for August data. The high levels of employment have resulted in steady wage increases and fueled expectations that consumer spending will also increase, adding to inflation. The dollar market interpreted this as a mixed set of signals and the greenback spend the morning rising only to stall later in the day.

It remains to be seen if the return of trading in China after a week long holiday will provide some balancing effect on the global market when markets reopen on Monday.

Oil prices stall

The upward march of oil prices has slowed down somewhat Friday, having spiked above $86 earlier in the day but this could be just a brief respite before the market starts attacking higher levels. The fundamental picture does not really provide an argument for much higher oil prices even though Iran sanctions are due to kick into action with a month but the market has now talked itself into this argument and the rally is unlikely to come to an end until the sanctions fully play out.