It’s been a mixed bag for European markets as the equity markets have managed to rally however this has been a expense of sterling, with cable falling to its lowest level since 2009 after poor manufacturing data this morning dragged on the currency. oil prices are yet again staging their late sell off to try and derail any positive feeling, however it does now feel that global markets are starting to settle down and regain a sense of calm after the mayhem of the last couple of weeks. That being said oil prices are looking to test $30 a barrel again, despite news of some member states calling for an emergency Opec meeting before the scheduled one in June. This is inevitably hitting stocks on the close, with the major indices embroiled in their daily fight to keep the market positive as energy stocks fall. Oil prices are relentless, and over the past couple of days we have seen numerous calls for the low at certain levels. In this current climate it is absolutely impossible to predict the low for this oil price, currently it’s a case of holding on for dear life. Any of those calling a bottom at these levels are much braver than me!
The prospect of a meeting was definitely capping losses earlier in the session driving prices back towards $32, however I can’t see it stopping the slide in the longer term. The call for the meeting is not necessarily a surprise as we have lost almost 20% since the start of the year and are looking to test $20 a barrel. Nigeria have long been a calling for a cut in production and have been vocal about their need for higher prices. The reported breakeven price for Nigeria is around $87 a barrel and with price looking so much weaker it’s no surprise if they are one of the countries asking for a meeting before the next scheduled one in June. Rumours are that others have also asked. The power however lies with Saudi Arabia, and up to now the Saudis have been un willing to break from the norm and even more unwilling to cut production. If we get a meeting scheduled then we could well see some upside movement, but we would still need to see action at the subsequent meeting in order to make a substantial difference to the price.
Retailers helped to push stocks higher earlier after WM Morrison (L:MRW) posted a 0.2% rise in sales, this subsequently saw its peers higher with Tesco (L:TSCO) topping the leader board moving higher by over 6%. One thing to remember about retailers however is that have had fallen aggressively over the last 12 months, leading the Morrison’s actually losing its place among the UK’s top 100 companies. After such a heavy fall there is not much surprise that the slightly better than expected numbers are helping the retail stocks higher.
It’s been a day that has been dominated by sterling however, the manufacturing data earlier this morning pointed showed poor numbers across manufacturing and industrial output in the UK. These numbers show that the UK is not in the same position as the US, and that any talk of the Bank of England raising interest rates are premature.