Glencore shook the markets
This week the markets were shaken by the volatility in Glencore shares.
Glencore is one of the world's leading integrated producers and marketers of commodities. On Monday its stock plunged by 29%. The selloff was provoked by concerns that the decline in commodity prices has brought the company close to insolvency.
Glencore’s main sources of income are copper, coal and oil, the prices of which have hit multiyear lows this year. The firm’s net debt accounts for $30 billion dollars. The company is trying to reduce this amount by a third by the end of 2016. As the markets became more and more nervous about the outlook for commodities and the global economy in general, the cost of insuring Glencore’s debt against default soared on Monday by almost 60%.
On Tuesday Glencore’s shares rebounded by about 20% as the company’s management tried to reassure the market saying that it took “proactive steps” in order to shield itself from commodity crisis.
Analysts at Citigroup claim that the market has overreacted and that Glenсore will be able to solve its problems. According to Citi, commodity firm has to consider going private again and restructuring its businesses.