Market commentary: Crude drops below $41 as U.S stock piles grow, demand weakens in China

Wednesday brought another round of losses in London as stocks fell, dropping along with other European equities, as worries about China’s economy weighed on commodities-related stocks.

The U.K.’s FTSE 100 slumped 1.9%, suffering its seventh straight loss on Wednesday, and opened 0.5% lower on today with blue chip stocks falling this morning.

Energy shares are also under pressure as crude oil prices continued to drop below $41 a barrel, hurt by a build-up in U.S. oil stockpiles and ongoing worries about over supply. Investors have also been concerned about demand prospects from China. The Markets are looking East and don’t like what they are seeing. Slowing economic growth, currency devaluation and stock market mayhem in China have hit commodities and mining stocks, and with them the U.K. stock market.

Among movers in London, Glencore PLC closed down 9.7% after the mining heavyweight said it swung to a first half-year net loss of $676 million, below analyst expectations for a net profit of $728 million, hit by slumping futures prices in commodities like copper and oil. There was a small recovery this morning with the stock price up 1.5%.

Other European markets followed the same theme as equities were broadly lower after stocks in China took another hit on concerns about the health of the world’s second-largest economy. The Shanghai Composite dropped as much as 5% intraday before turning higher. Resource companies are among those that can be sensitive to conditions in China, a major buyer of metals and oil.

Greece made a crucial 3.2 billion euro debt repayment on Thursday using newly released bailout funds. The repayment to the European Central Bank marked another step for Greece away from near financial collapse, but Prime Minister Alexis Tsipras must now tackle a political crisis after anti-bailout rebels robbed his government of its parliamentary majority.

Athens repaid the debt using money from the first instalment of its new bailout after the program cleared its final hurdle on Wednesday night, with the ESM European bailout fund approving the 86 billion euro deal.

Greece agreed to raise 50 billion euros by selling state assets as one condition of its new international bailout. The airport deal is the first major transaction under the privatization program.

Germany will soon be running many of Greece's busiest tourist airports as airport operator Fraport, which is controlled by the German state of Hesse and the Frankfurt city utility, is paying 1.2 billion euros ($1.3 billion) for a 40-year concession to manage 14 regional Greek airports.

Currency movements have had an impact on exporters in Europe; Switzerland's exports fell in July as the strength of the Swiss franc curbed demand in the European Union and Asia for its chemicals, pharmaceuticals, machinery and watches. Exports in July slipped 4.9% from a year earlier, in real terms, to 17.93 billion Swiss francs the customs office said Thursday.

On the flip side, Royal Ahold NV Said on Thursday that its second-quarter net profit rose 33% from a year earlier, as the Dutch supermarket operator reaped the benefits of generating about two-thirds of its sales in the U.S. The euro weakness against the U.S. dollar provided a sharp increase to the value of its sales.

This was Ahold's first earnings report since the announcement of its planned $29 billion merger with Belgium's Delhaize Group, a tie-up that would create one of the largest supermarket operators in the U.S.

This article was issued by Andrew Cassar Torregiani Trader/Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.