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• Commodity stocks dent FTSE 100 sentiment
• Markets concerned over implications of Warsh appointment
• Big week for earnings and eco announcements

Commodity-linked stocks are acting like a weight around the neck of the FTSE 100 this morning, with last week’s sharp declines for the likes of gold and silver continuing apace today. Weakness for the precious metal names such as Fresnillo and Endeavour mining have been accompanied by declines for the likes of Antofagasta, Glencore, and Anglo American as we see prices for the industrial metals also head lower. Notably, oil prices are joining in on the declines, as concerns around a potential weekend attack on Iran fail to come to fruition. Taken in totality, this is good for inflation expectations, pushing back against the concerns seen following Friday’s 0.5% PPI figure. 

The price action seen over the course of the past 3 trading days has been nothing short of historic, with the nomination of Kevin Warsh as the next Fed chair sending shockwaves throughout markets. Understandably, this appears to mark the end of easy money, with the repeated desire to shrink the Fed balance sheet and avoid constant monetary intervention meaning that markets could lose a key factor which has helped deliver the stable and consistent 10% average S&P 500 return. For a market which faces up to the possibility of an AI-led collapse at some point over the coming years, there is a concern over how things could play out if Warsh refuses to step in to limit the fallout if necessary. Nonetheless, Trump’s joke that he would sue Warsh if he doesn’t cut rates does highlight the contradiction that market concerns around a hawkish Fed Chair could also come with a flurry of cuts if his likely promises to the President are followed through on. After-all, Trump’s insistence that Powell was “too late” despite having cut rates repeatedly this year means that the President clearly has an expectation that whoever takes the hot seat will take dramatic steps to lift the economy despite the risk to inflation. Could the apparently hawkish Warsh provide exactly the kind of voice that the committee could follow if he pushes a dovish pathway for rates?

Looking ahead, this week has a raft of key data points and market moving events, with Friday’s jobs report preceded by the latest rate decisions from the BoE, ECB, and RBA. Meanwhile, the earnings calendar brings updates from the likes of AMD, Merck, Alphabet, Eli Lilly, Qualcomm, and Amazon.com. Those earnings kick off today, with Walt Disney before the bell and Palantir after the close. However, with traders looking nervously over towards price action in the commodity space as an indicator of potential volatility that can spill over into other markets, the economic calendar currently looks to be playing second fiddle right now.

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