The FTSE is moving in to the close some 1.2% higher, rebounding after a stronger finish on Wall Street before the weekend and a positive start for the Street on the open. Miners and oil stocks were noticeable climbers on the FTSE, as commodity prices staged a recovery thanks, in part, to a slightly weaker dollar.
Oil to $60 per barrel
Oil ended six straight sessions of losses, which saw WTI experience one of its worst weekly sell offs since 2016 and the price sink below $59 per barrel for the first time this year. Oil had been hit by concerns over increasing US oil production, a stronger dollar last week and general risk aversion in the market as equities sold off. However, whilst the dollar has eased back and oil has rallied today, there are still a number of factors working against oil which could still weigh on the price going forward.
The most prominent risk for the price of oil is increasing US oil production. The number of US rigs is on the increase, the Baker Hughes Report showed that the number of active oil rigs jumped by 26 last week. Whilst an OPEC report forecasting an increase in oil demand going forward and geopolitical tensions in the Middle East have supported the price of oil, pressure from increasing US oil production is likely to keep any rally in check.
Wall Street and bond yields move higher
Wall Street has started the new week on the front foot after rebounding late on Friday. Interestingly the US equity indices are charging higher, despite treasury yields also moving northwards. The heavy sell off in equities initially started as investors became increasingly spooked by the prospect of rising interest rates and the end of cheap money, evidenced through climbing US treasury yields. However, after the worst sell off in US equities in over two years, the rebound in both equities and yields looks like the market could be comfortable returning to the old norm, although it will take more than one up day to start calling the bottom. US treasury yields pushed to 2.9% before easing back to 2.86% whilst the Dow and the S&P are trading 1% and 0.5% higher respectively.
Pound fails on capitalise on dollar weakness
In the forex markets the dollar is seen drifting lower versus a basket of currencies as risk aversion subsides. Whilst the euro is capitalising on the weaker greenback, the pound is seen sinking lower on track to test $1.38 ahead of the UK inflation data due early tomorrow.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.