The retreat in the oil price has dented the FTSE this morning as oil majors and a number of miners lost some ground. Shares in Aviva (LON:AV) are also struggling as the insurer undergoes changes at its helm, losing its CEO with immediate effect. But it is the banking sector that is currently seeing the highest volume of trade having received an indirect boost from strong earnings by Swiss heavy weight Credit Suisse (SIX:CSGN).
Most European gauges other than the DAX are also pointing lower on fresh concerns that now that China’s economy is showing some signs of improvement, domestic policy makers may take their foot off the pedal of the economic support programme that is currently in place.
On Wall Street the S&P and Nasdaq posted an all-time high but that did not spill into Asian markets where China’s economic direction remains the dominant factor.
Oil looking for the new normal
Oil prices have yet to settle around a new normal level. The confluence of intensified sanctions on Iran, fresh problems with supplies from Libya and existing sanctions on Venezuela are keeping prices at six month highs although they notched lower this morning after some turbulence in Asian trading hours. What happens next will largely depend on the OPEC meeting in Jeddah next month when oil producers meet to discuss whether they want to keep the current output restrictions in place or ease the flow to prevent prices from moving any higher.
As ever, it will be a fine balance between a boost for major oil companies and oil producing countries and the pain that higher prices inflict on oil-dependent industries such as resources companies, chemicals and airlines.
Euro notches lower as German business confidence slides
The euro is losing some ground against the dollar and sterling in the wake of weaker business confidence numbers in Europe’s largest economy. German Ifo data showed an unexpected decline in March, particularly in the manufacturing sector hit by China trade disputes and Brexit. The pound is doing very little against other majors, enjoying the calm before the Brexit storm inevitably takes over again. Now that a Brexit decision has been postponed for a few months MPs are re-aligning their positions ahead of a fresh battle and among others, former Conservative MP Ann Widdecombe is joining the fray by standing as a candidate for Nigel Farage’s Brexit party in the upcoming European elections.
Primark results soar
Associated British Foods (LON:ABF) had taken a big hit in its bakery business after it lost a key contract, while its sugar division has posted another weak result. Once again, though, Primark has saved the day and the company's full-year guidance has been left intact.
The respective leaders of Associated British Foods have dipped their fingers into ever more pies over the past 83-odd years and current management has shown little appetite for changing course and pursuing a break up.
But the more Primark keeps shooting the lights out, while sugar struggles, the more salivating the prospect of a historic split becomes.
Although Associated British Food shares have performed well over the long term, they've fallen 14% in the past five years, underperforming a 12% rise in the FTSE 100.
Be it through a Primark spin-off or a sugar sell-off, pressure will grow on management to consider their options if the shares can't break out of their current holding pattern soon.
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