Glencore’s share price is usually influenced by the moves in the underlying commodities market. China is a major importer of minerals and for several metals it is the largest buyer in the world. The Chinese government are operating a zero-Covid policy and various localised lockdowns has dented their economy. In the past five months, the Chinese manufacturing PMI report has showed negative growth four times. This comes at a time when there when inflation is on the rise, we have seen interest rate hikes, and there is growing concerns about the health of the global economy. In recent weeks, the IMF and the World Bank lowered their forecasts for the global growth. In July, metals came under major pressure and copper, silver and nickel all fell to their lowest level in at least 18 months – that coincided with Glencore’s share price falling to a five-month low.
In April, traders reacted well to Glencore’s first quarter production update as it was “for the most part” in line with expectations. Cobalt, coal, and nickel production increased by 43%, 16% and 22% respectively, while on the other hand, output of copper, silver and zinc all fell between 14% and 16%. The marketing division, which houses its commodities trading unit, performed well and it expects to comfortably exceed its earnings guidance of $2.2-$3.2 billion.
Commodities have seen a lot of volatility in recent weeks and metals like copper and silver have enjoyed sharp rebounds. Last week, the Federal Reserve carried out a dovish hike where it lifted interest rates by 0.75%, meeting expectations, but it signalled it might look to scale back the size of future rate hikes. The very mention of a smaller hikes sparked chatter then US central bank might be over worst of the hiking cycle. As a result, there was a sizeable fall in the US dollar, and that facilitated the jump in metals. Glencore and its peers, BHP Group and Rio Tinto all saw gains in their respective share prices thanks to the upbeat mood in the commodities market.
The Glencore share price fell to a five-month low in July, but it has rallied since. If the stock holds above the 440p zone, the bullish run could continue. 485p might act as resistance, and a break above the level might bring 500p into play. A fall below the 440p area could see it target 400p.
Glencore will announce its first half figures on Thursday 4 August.