FTSE 100 rallies as Glencore leads mining charge

After an erratic few weeks, the FTSE 100 index is back near its post-pandemic high as surging metal prices boost miners.

Wall Street earnings and a fired-up commodities sector pushed the FTSE 100 index to a two-month high today as sentiment continues to steady after erratic trading in recent weeks.

US and China inflation figures broadly in line with expectations and the acceptance that the Federal Reserve's tapering of economic stimulus will finally begin in the next month or two were factors in what's turned out to be a much less volatile week for markets.

Worries over supply chain disruption or a default on Evergrande (SEHK:3333) debt haven't gone away, but for now investors are prepared to commit new money as third-quarter results start to flow.

There was early encouragement as the Wall Street-listed shares of Morgan Stanley (NYSE:MS), Citigroup (NYSE:C) and Bank of America (NYSE:BAC)were being priced to open higher after strong performances in the September quarter.JPMorgan Chase (NYSE:JPM) set the ball rolling yesterday with forecast-beating results, driven by the recent boom in M&A activity and release of more loan loss reserves.

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The concern remains that earnings guidance in other sectors will show that analysts are being too optimistic about the impact of supply chain pressures on 2022 margin forecasts. The results action picks up pace next Tuesday when Procter & Gamble (NYSE:PG) and Netflix (NASDAQ:NFLX) post figures, the day before numbers from Tesla (NASDAQ:TSLA) and IBM (NYSE:IBM).

Hopes that the inflation pressures are only temporary will be further tested by today's surge in commodity prices, which in some cases are being driven higher by a supply squeeze created by energy-related factors.

The big rises for copper, aluminium and zinc were particularly beneficial for Anglo American (LSE:AAL) and Glencore (LSE:GLEN), whose shares climbed 3% as the FTSE 100 surged as much as 69 points, or almost 1% to 7,211. The top flight is at its highest level since August and only 13 points away from its highest since February 2020.

Glencore shares are now up 14% over the past month and by 56% in the year to date as a portfolio built on copper, cobalt, zinc and nickel benefits from demand for the transition metals that will be central to decarbonisation efforts.

The zinc price is a particular focus after one of the world's biggest smelters this week cut output by up to 50% in Europe due to rising energy prices. Zinc was up another 3% today after lifting 5% yesterday to the highest level in three years.

Similarly, the aluminum price has been at a 13-year high as China's power shortages impact on production of the metal. So far, the higher prices being faced by the country's manufacturing industry are not being passed on to consumers after today's China's consumer prices index figure rose by a smaller-than-expected 0.7% in September.

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In contrast to aluminium or zinc, the price of the key steelmaking ingredient iron ore has fallen back on a deteriorating demand outlook in China and uncertainty surrounding possible production curbs. Rio Tinto (LSE:RIO) and BHP (LSE:BHP) are down by 12% and 3%, respectively, so far this year but both rallied 3% today.

Other risers included Polymetal International (LSE:POLY) after the Anglo-Russian precious metals company benefited from the traditional inflation hedge of gold posting its strongest daily performance since March. Gold was at $1,795 an ounce, helping Polymetal shares lift 3% or 42p to 1,361p.

Oil giants BP (LSE:BP.) and Royal Dutch Shell (LSE:RDSB) also featured on the FTSE 100 risers board after Brent crude price futures stood at $84 a barrel, representing the latest three-year high.