Equities Update: FTSE consolidates alongside firmer commodity prices

Adam Vettese, analyst at investment platform eToro, says: “The FTSE 100 was little changed in afternoon trading on Wednesday, despite advances for several major commodity-related components. Glencore, one of the world’s biggest marketers of oil, led the index, rising 3%, as the oil price pushed higher. Copper miner Antofagasta improved by more than 2%, while Anglo American, the world’s largest platinum producer, rose 1.5%, alongside a rebound in the price of platinum.

“Firmer commodity prices in conjunction with yesterday’s hotter-than-expected US inflation data could put a further bump in the road for central bankers. Both the Fed and the BoE make monetary policy decisions next week and although neither are expected to cut rates yet, the incoming data does not yet make much of a case for a cut in May either.

“After posting a record closing price on Tuesday, the pan-European STOXX 600 edged higher on Wednesday to set new all-time highs, with Spanish fast-fashion giant Inditex surging 7% on the back of double-digit growth in sales numbers for its Spring/Summer sales collection compared to last year.”

Critical situation in North America weighs on Adidas

Ben Laidler, Global Markets Strategist, at eToro says “The Adidas stock started strong in trading on Wednesday, nearly reaching the peak of €198 from 2023. Despite a loss of €58 million and a 4.8% decrease in revenue to €21.4 billion in 2023, investors seemed initially unfazed. However, a rapid sell-off followed, abruptly pushing the stock into negative territory.

“The situation in North America is particularly critical, where 28% of revenue is generated. High inventory levels and an anticipated decline in sales will continue to weigh heavily. February’s US retail sales data will be crucial in assessing consumer strength, especially after January saw only a 0.6% year-on-year increase, the lowest since May 2020.

“Adidas remains confident that growth will emerge in other regions, potentially supported by fundamental factors. China, accounting for 14% of the revenue, has emerged from deflation after four months and has set a GDP target of around 5% for 2024. In Europe, where 38% of the revenue is generated, the European Central Bank could lower interest rates in June, potentially benefiting Adidas and stimulating consumption.

“Adidas is primarily counting on strong growth in the second half of the year. Although this point in time is still a long way off, the markets often anticipate developments in the real economy, usually six to nine months in advance.

“Currently, the Relative Strength Index (RSI) sits at 56 in the neutral zone, suggesting the stock is not overbought. A breakout above the €198 peak could set the next target at €220. Key support levels include the 50-week moving average at €174 and the September low at €154.”

Hochschild shines as gold prices soar

Adam Vettese, analyst at investment platform eToro, says “With gold prices near record highs, is it really better to be selling the shovels right now? Hochschild’s results may indicate not, as they have recently shown decent performance, including at their latest Mara Rosa mine in Brazil. The mine looks like it will produce around 25% of their overall production target and come in below the target cost. 

“Gold prices cooled from their peak yesterday as the US inflation number came in hotter than expected, indicating we could be at higher rates for longer, which may incur further pressure. That said, there is still plenty of margin for miners like Hochschild to make solid profits provided they can keep costs in check.”