Monday’s Master Investor Market Report

– The FTSE 100 closed the day at 5,898.87, a decrease of 288.78 points.
– The FTSE 250 fell by 629.27 points to finish at 16,876.60.
– The FTSE All Share dropped by 148.70 points to 3,251.23.
– The FTSE AIM All Share finished at 702.40, a fall of 30 points.

You may have heard that today has been a bad day on the markets. Chinese shares fell by 9% with over 80% of tradeable firms seeing a decrease in value. After the country’s recent stock market declines and currency devaluations, the Government and it’s “National Team” of state owned brokers and banks had promised to support the market, and independent analysts as well as retail investors had expected some of this support to materialise over the weekend.

Some of the more conspiracy minded denizens of the internet have suggested that this may be to clear the way for state pension funds to make a massive bear play, but the more reasonable view is likely to be that bureaucrats sat down with a copy of the industrial output figures, looked at how much it would cost to prop-up the markets, and then left things to run their course.

The reality is that all sorts of other issues tie-in to those production figures and the Government’s unwillingness to step in and intervene passes on a strong signal to global markets. As a result of this, we can see that the prices for key input commodities like copper and oil have dropped sharply today. Following on from that we can see the firms that produce these goods have also taken a tumble. For instance, Glencore dropped by more than 10% today and has now fallen by more than 50% in the last six months.

Some of the remaining losses are likely to be noise and we may see some companies make swift recoveries, but the underlying issue of Chinese production and therefore GDP will have direct effects on some additional firms and, of course, there will be some second order effects as the wider UK economy absorbs the fallout.

There will probably be some great buying opportunities in the next few days, but even if the valuations seem tempting it still might be worth steering clear of oil, gas and mining for the time being. The next big question is how central banks will respond, with some noted voices such as former US Treasury Secretary Larry Summers suggesting that further loosening of monetary policy may be back on the table.

Meanwhile, insurer Amlin (AML) reported profits before tax of £143.3 million during the six months ended 30th June, a fall from the equivalent period of 2015, which was primarily caused by a change in the way the company accounts for the premiums on its catastrophe reinsurance contracts. Top line gross premiums rose by 6.2% to £2 billion. Shares in the company fell by 21.5p to 478.5p.

Floor coverings specialist Headlam (HEAD) has seen its pre-tax profits for the first half of the year rise by 15% to £12.3 million. Revenues were up by a more modest 4% and management said that the full year results were on course to beat the company’s internal forecasts. Improving UK consumer sentiment was responsible for the change. Investec initiated coverage at “buy” with a target price of 570p. Headlam shares dropped 7.75p to 462.25p.

Outsourcing and distribution solutions provider Bunzl (BNZL) increased pre-tax profits for the first half of 2015 to £147.1 million, an 11% rise over the equivalent period of last year. Hargreaves Lansdown said that the results were in line with expectations but that there were outstanding concerns about its exposure to difficult emerging markets such as Brazil. The shares closed at 1,671p, a decline of 114p.

Mediazest (MDZ) shares plummeted 30.77% to 0.14p after the audio-visual firm posted a £776,000 loss for the year and revenues fell by almost half a million pounds. The company attributed the fall in sales to delays on a major project, but said it had managed to win a number of new contracts over the year and that it had made a positive start to the current financial year.

Tomorrow’s news today

Antofagasta (ANTO), Regus (RGU), and Al Noor Hospitals (ANH) will publish interim results tomorrow, while BHP Billiton (BLT) will post its full-year results.

Quote of the day

“Nothing is a waste of time if you use the experience wisely.”
– Auguste Rodin