Miners and house builders drag FTSE lower

European markets have lagged behind their US counterparts, with the FTSE being dragged lower by mining and housing stocks.

• US stocks perform well despite IBM earnings disappointment.

• Miners and housebuilders on the back foot.

• Financial expected to outperform, with Barclays enjoying a strong Q3

US tech stocks are an outperformer in early trade despite disappointing IBM earnings Unfortunately, European markets have spent much of the day floundering after Evergrande’s deal to sell $2.6bn worth of their property services business fell through. While the ramp-up in commodity-driven inflation has helped lift the outlook for miners, today’s selloff across metals and energy has led to a major decline for the likes of Rio Tinto, BHP, Anglo American, and Glencore.

While elevated inflation appears to be here to stay, today highlights how we should expect major volatility as part of this process. Elevated input prices, transport costs, and wages remain a concern despite today’s decline in commodity prices, with a decline in the Philly Fed manufacturing survey bringing a timely reminder. UK housing stocks are also under pressure today, with the impressive August HPI figure of 10.6% cast aside as investors prepare for higher mortgage rates. While inflation did ease back in September, the elevated prices evident in the UK look set to push the Bank of England into a tightening phase that will likely dampen property demand.

While higher rates should do little to help the housebuilders, the financials look well placed to take advantage of higher growth and improved margins. The latest Barclays earnings highlight the benefits of an investment banking arm. However, with markets widely expecting the November rate rise to be the first of many, the UK banking sector finally looking more attractive.