FTSE rallies 40pts | Xstrata board approves improved Glencore offer

<p>The FTSE 100 rallied 0.8% in early trading on Monday led by gains in heavyweight miners and banking stocks as investors moved to buy back […]</p>

The FTSE 100 rallied 0.8% in early trading on Monday led by gains in heavyweight miners and banking stocks as investors moved to buy back into the markets after the UK index lost around 3% in the last two weeks.

Today’s recovery in stock prices helps to confirm the bullish near term trend line to which the FTSE 100 has bounced from on each of the last 5 times there has been a small correction in the markets. A close back above the 5820 level is needed for the confirmation that support lines have held.

Xstrata’s board finally gave their blessing for Glencore’s improved offer of $33bn, lifting the share price of Xstrata by 1.7% and weighing on Glencore’s shares price by 0.7%. Xstrata said that they approved the revised offer, which came after major shareholders indicated they would vote down the initial proposal, but maintained that they would do so only on the condition that shareholders also support the controversial pay package aimed at retaining key managers for at least two years, which is a controversial issue. Glencore’s new offer of 3.05 new shares for every Xstrata one held came after a surprise last minute meeting a few weeks ago that was chaired by the former Prime Minister Tony Blair, who is a consultant for one of the banks brokering the deal.

Heavyweight mining stocks also received a lift from broadly in line data out of China. Chinese CFLP Manufacturing PMI came in at 49.8, just below expansion territory and below consensus forecasts of 50.0 but did recover from a previous reading of 49.2. The rise helps to ease concerns over even weaker Chinese data but also keeps the potential for further monetary easing in play by the People’s Bank of China.

There is a raft of economic data due out today in the shape of German, EU and UK manufacturing this morning at 9am, euro zone unemployment at 10am and US manufacturing and construction spending at 3pm.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.