With trade tensions heating up and weighing on sentiment, energy prices dropping following the OPEC production increase and house builders under pressure from estate Countrywide’s profit warning, it comes as no surprise that the FTSE has shed close to 2% at the start of the week. The stronger pound and a gap lower on Wall Street has also done little to support the UK index as it wipes out all the gains from Friday’s session.
Losses on the FTSE were broad based, with just 4 stocks in positive territory moving into the close. Heavy weight commodity stocks, the miners and oil majors dominated the loser board tracing commodity prices lower.
Oil dives 2% post OPEC
OPEC’s agreement over the weekend to ramp up oil production by 1.8 million barrels per day was over double what traders had been anticipating, causing the price of oil to drop 2% lower as it opened for trading on Sunday. $74.00 per barrel is offering support to Brent so far today, however with as trade war fears escalate concerns of decreasing oil demand could see the price fall further in the coming days. The heavy drop in the price of oil saw oil majors BP (LON:BP) and Shell (LON:RDSa) take a hard hit, both dropping over 3.2%.
Trade war fears heat up
Trade war fears appear to be ramping up almost daily. Initially traders were rather complacent that Trump’s threats were just a hardball negotiating tactic. However, he has more than proved that his intentions are far more serious and damaging; this realisation has struck market sentiment hard.
Global equities are falling sharply today, with indices on both sides of the Atlantic succumbing to losses of over 1%. The fear that is driving the markets here is at what point does this end? How much damage needs to be done to the economies involved and global trade in order for Trump to decide enough. This is a huge uncertain in this very dangerous game of economic “chicken”, as investors are starting to see US – Sino relations sink past the point of no return. In the absence of any optimistic news over the global trading climate, we can expect the current sell off to intensify over the coming sessions.
House builders lower as Countrywide drop 22%
Estate Agent Countrywide (LON:CWD) trade 22% lower following a warning on future profits; a depressive tone which dragged house builders lower. This is the second troubling outlook for the sector in less than a week which is starting to make investors anxious.
The dampening of the housing market thanks to Brexit uncertainty and stagnant wages is really starting to show through now and that is unnerving investors.
Heathrow Runway vote
After a decade of debate MP’s will finally vote on the third runway at Heathrow. Despite the widely accepted view that another runway is needed to cope with capacity in the South East the project has only ever received a luke warm reception. At what can only be described as an astronomical cost, the project for the third runway at Heathrow brings questions over how Heathrow will raise the money given its fragile balance sheet. The chances of this runway being built on time and within budget are close to 0, with fears rising that such a project could instead send Heathrow bust.
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