Attention to G20 and currency wars; Anglo beats expectations

<p>European markets had a relatively flat start to the final day of the trading week, with many investors choosing to sit on the sidelines and […]</p>

European markets had a relatively flat start to the final day of the trading week, with many investors choosing to sit on the sidelines and await the outcome of the two-day G20 meeting in Moscow. After such a strong January investors are feeling slightly more nervous towards the markets, especially following European data released yesterday which showed that the zone’s economic troubles are far from over and a contraction in the economy persisted.

Looking towards the G20, currency wars are expected to be the main topic of conversation with the focus staying on Japan and its recent attempts to further devalue the yen in an attempt to kick start its stagnant economy. Currency markets were thrown into the spotlight this week after the G7 issued a statement that domestic economic policies must not be used to target currencies, but there does not appear to be any consensus to demand any action, especially given that the US has also printed money at a speedy rate.

Policymakers have tried to shift attention to a discussion based on productivity and the fragile global recovery and stated that we are “the furthest away today from a currency war than we were two or three years ago.”

Here in the UK, precious metal miners were among the biggest losers in the FTSE 100 following downgrades by Citigroup. Randgold Resources and Fresnillo dropped 3.5% and 3.2% respectively after being cut from neutral to sell.

Anglo American released its full year results and surprised the markets with a better than expected 2012 despite the numerous challenges that the company faced. Expectations were particularly low for the miner after their $4.6 billion impairment charge, falling commodity prices and ongoing cost pressures. Anglo reported a loss of $239 million, compared to a profit of $10,782 million the year before, however, the outlook statement was slightly more upbeat with renewed optimism and they also increased the final dividend by 15% to 53 cents. By mid morning the shares were trading 1% higher at 2034p.

Johnson Matthey suffered the knock on effects of a poor year for Anglo American, shedding over 2.4% after announcing a change in contract with the miner which will result in a loss of over £35 million in commission for the chemical group.

With little out in the way of economic data investors will stay tuned to the developments of the G20 and also look towards the US this afternoon for the University of Michigan Confidence.

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