The wider sentiment in the markets is downbeat as worries about lower global growth, rising inflation and interest rate hikes are dominating the headlines. Last week, the DAX fell to its lowest mark in almost two years, and the S&P 500 dropped to a three-month low. Glencore shares have come under pressure recently but they are holding up reasonably well compared with the wider market. Can Glencore weather the storm? Or will it eventually get dragged lower by the broader bearish sentiment?
In August, the mining giant posted record first half profits as underlying earnings more than doubled to $18.9 billion. Most companies suffered as a consequence of Russia’s invasion of Ukraine but commodity prices surged because of supply concerns and in turn that helped Glencore. Gary Nagle, the CEO stated, "Global macroeconomic and geopolitical events during the half created extraordinary energy market dislocation, volatility, risk, and supply disruption, resulting in record pricing for many coal and gas benchmarks. Even though the jump in prices benefitted Glencore in the short-term, Nagle cautioned that at some point the negative impact of the war would catch up with Glencore as the also stated, “looking ahead, tightening financial conditions and a deteriorating macroeconomic environment present some uncertainty for commodity markets through the second half of the year”. Seeing as earnings soared, the company took the opportunity to reward shareholders, and a $3 billion share buyback scheme was announced. The move sends out a positive message, at a time when come so banks and retailers have issued cautious outlooks.
Metal’s typically influence Glencore’ share price and sentiment in starting to turn lower in that sector. Zinc, copper and iron ore are edging lower ,and they are not too far away form retesting the lows of July ,which by the way significant areas of support, so if those commodities fall below their respective lows, that could spark a major volatility in the stock.
Glencore’s share price dropped below 400p in mid-July, but since then it has been trending higher. While it continues to hold above the 440p mark, it is possible the bullish trend will continue. If the 512p area is cleared, it could bring 600p into play. Even the stock has been mostly trending higher, it is worth noting, the peak in September, failed to retest the high seen in August, so that could be an early sign that a change in trend is in the offing. Should Glencore’s share price fall below 440p, that could pave the way for 400p to be tested.