Volatile US markets keep Europe on its toes

Oil stocks and miners are leading the FTSE risers this morning after BP reported a doubling of quarterly profits and the best underlying results in over five years.

Oil stocks and miners are leading the FTSE risers this morning after BP reported a doubling of quarterly profits and the best underlying results in over five years.

This year’s rising oil prices have worked in the oil giant’s favour, though the company kept its production level flat. But this morning the crude price started heading south, albeit slowly, undeterred by the Iran sanctions which will kick in next week. Saudi Arabia’s promise to the US to keep production levels up in the face of a potential supply freeze is keeping a cap on any panic buying.

FANG drop and Trump’s new China threats weigh on stocks

Despite the FTSE’s positive open today’s session could turn fairly volatile as US markets Monday registered one of the largest intraday drops in months. The revered FANG stocks were in the centre of the decline, losing a combined $200 billion in value over two trading days. President Trump’s fresh threats to impose more tariffs on China didn’t help even though they were tampered down with offers for a new “great deal”. While bad for shares, the comments boosted the dollar to an almost ten-week high with the greenback attracting some safe haven buying amid concerns that an escalation of the trade tensions with China would be a drag on the global economy.

Pound between the budget and the BoE

The pound remained unimpressed by yesterday’s budget in which the Chancellor Philip Hammond declared the end of austerity and promised tax cuts. There is a deep sense that a no-deal and hard Brexit solution would make most of the Chancellor’s plans null and void, instead the bigger impact on the currency and bonds will come from the Bank of England’s rate setting meeting next week. A no-rate-change decision seems to be a given but if Mark Carney manages to convey a sense of preparedness for a no-deal Brexit he may be able to calm the markets sufficiently to avoid volatility. Treading water until the BoE news and some clarification on the future of Italy’s budget, sterling weakened 0.11% against the dollar and 0.14% against the euro.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (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.