“The ongoing rise in oil prices amid a tighter supply outlook is a worry for corporates and consumers as it is a major inflationary force,” says Russ Mould, investment director at AJ Bell.
“A 0.8% advance to $88.08 per barrel puts the commodity price at its highest level since October 2023 and explains why Shell and BP were among the biggest drivers for the FTSE 100 today. Commodity producers account for a large weighting of the FTSE 100 and the index typically does well when these stocks are bid up.
“The FTSE 100 moved 0.6% higher to hit 8,000 in early trading, back to highs not seen since February 2023. That provides a psychological boost to investors and implies that the blue-chip UK index still has some life left in it.”
US interest rates / Job data
“The Federal Reserve will be watching the commodity market like a hawk as part of its decision-making on interest rates. It has a dual mandate of controlling inflation and getting the US as close to full employment as it can. Markets currently believe it can pull off the treble of cooling inflation, managing a soft landing for the US economy and cutting rates.
“If higher oil prices threaten to rock the boat, investors will certainly not want any drama from job figures this week.
“The number of job openings in the US slipped in January and the same is expected again when February’s figures are reported this afternoon. Friday will see further jobs data, covering non-farm payrolls, unemployment and wage growth. Markets will be looking for a figure that is neither too hot as an overheated market might postpone rate cuts, or too cold as disappointing data would increase speculation of a hard economic landing.”
UK housing market
“The UK housing market has been doing its best to bounce back, yet latest data from Nationwide would suggest it is still a slog to shift property.
“House price growth was subdued in March as many people remain priced out of the market. We really need to see interest rate cuts to prompt a big drop in mortgage rates and improve affordability levels.
“While shares in housebuilders eased back slightly on the Nationwide data, investors didn’t seem too worried about the figures as no-one expected the property market’s recovery to be fast and hard.”
Superdry
“Investors finally had a chance to price in a barrage of bad news from Superdry which was released after the market close last Thursday. The share price slumped by 47% which implies disaster.
“Julian Dunkerton has withdrawn his attempt to take the troubled retailer private which means Superdry now faces the prospect of having to conduct a heavily discounted fundraising to stay alive, conditional on delisting the group from the stock market.
“It has secured additional borrowing facilities that come with a chunky interest rate but that’s only going to be a small plaster on a big wound – not enough to save the day.
“Investors now appear to be dumping the stock to get back anything they can, even if it means crystalising a loss. In the absence of someone else throwing their hat in the ring and trying to buy the business, we can probably wave goodbye to Superdry as a listed entity.”
These articles are for information purposes only and are not a personal recommendation or advice.
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- Thu, 02/05/2024 - 10:55