European shares bounce as oil trades higher

Despite a little dip towards the end of the day caused by a lower open in the US the FTSE made solid gains Thursday, as did most European indices.

Despite a little dip towards the end of the day caused by a lower open in the US the FTSE made solid gains Thursday, as did most European indices. One of the major drivers was higher oil and commodity prices; three out of the top five FTSE risers were mining companies, and oil producers were not far behind.

In contrast, with the arrest of Huawei’s CFO still fresh in investors’ minds Wall Street tech stocks came under pressure for fears that a further frosting of trade relationships between the US and China will negatively affect demand. On the sellers’ hit list were chip makers and fiber-optic companies in particular, because of their heavy reliance on Chinese buyers, but the tech sector as a whole suffered on fears of some form of retaliation for the Huawei arrest.

US jobless at historic low

Apart from the China trade factor the US markets have been more nervous than usual over the last few sessions as investors are getting increasingly concerned that the long-term bull run in the stock markets may be nearing its end. During the week the yields in the bond markets inverted – that is, some of the yields on longer term papers declined below the shorter term yields, a reversal of a normal situation and a signal that has in the past preceded economic downturns. On the surface though, data coming out of the US still points to solid domestic growth. The latest jobless numbers show that job creation continues apace, albeit at a slightly slower pace than some economists have expected, while jobless claims remain at a low not seen since 1969. The dollar traded mixed on the day, weaker against the euro but stronger against the pound, concluding a week which has seen the currency give up significant ground. The main worry for traders is that the Fed will readjust its rate hike programme planned for December and early next year in anticipation of slower growth, which would weaken the greenback still further.

Oil price jumps on production cut deal

The closely watched OPEC meeting in Vienna which was expanded to include Russia and 9 other non-OPEC countries has finally concluded a plan to cut production by a solid 1.2 million barrels a day, not far off 1% of the global oil production. Saudi Arabia initially advocated for a lower rate, but the actual figure producers eventually agreed on was much closer to what oil investors had hoped for. Of that, OPEC will reduce output by 800,000 barrels a day while the rest will be scaled back by Russia.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.