FTSE Flat Even as Oil surges on Venezuela Supply Crisis

The FTSE is trading marginally higher as it moves towards the close, after recovering from an LSE glitch and a brief dip into the red. Oil stocks, financials and home builders are showing the most promise on the index which is also being aided by a weaker pound and a stronger start for the broader US markets.

Oil rallied hard across the session, jumping 1.5% and recouping losses from the previous session. Buyers came flooding back into the oil market as concerns over supply issues in Venezuela overshadow fears that OPEC could be on the verge of easing oil production cuts. 

With 2 weeks remaining until the OPEC meeting in Vienna, we are expecting an increase in volatility as investors weigh up the probability of an increase in production against the increasing supply problems in Venezuela and Iran. Oil stocks such as BP and Shell traced the price of oil higher.

House builders lifted as house prices rise

House builders were also performing well on Thursday following some encouraging data from Halifax that showed the UK housing market picked up more quickly than anticipated. The Halifax house price index showed house prices rose 1.5% in May, up from a 3.1% decline in April and an improvement on the 1% expected. 

The housing sector has been the star performer in the construction industry for some time as investments in larger commercial projects dry up. Therefore, investors were particularly pleased to see the rebound from April’s disappointing figure as house building returns to its position propping up the construction sector of the economy. 

A positive start on Wall Street shows that investors remain resilient in the face of trade tensions, preferring to focus on encouraging fundamentals such as solid economic growth and strong corporate updates, in addition to a broadly accommodative Fed.

Brexit weighs on the pound

Much of the focus in today’s session has been on the forex markets. The pound was struggling to keep its head above $1.34 as a quiet economic calendar meant traders focused intently on negative Brexit headlines. 

Prime Minister Theresa May agreeing to put planned end to the “backstop” of remaining in the customs union until 2021 unnerved investors. 

Whilst the backstop had been a potential unlimited soft Brexit option, hard-line Brexiteers have pressurised May towards a more definite alternative, a deadline giving way to a possible hard Brexit, which is less favourable for the pound.

Euro rally continues

The euro extended its rally from the previous session, hitting a 3-week high as investors move to price in at 90% an interest rate rise by the ECB in July next year. 

Confirmation by ECB officials that talks will begin on how to end the QE programme, in addition to an upbeat outlook on the eurozone economy plus the easing of political turmoil in Italy has lifted the euro by 1.4% so far this week.