Stocks in Europe flip-flopped in morning trade with early gains turning to small losses. The chances of a Fed rate rise in September have diminished to the point of non-existence after Fed governor Brainard’s cautious speech last night. It’s the sudden burst of volatility that has investors scratching their heads over whether it’s a buying opportunity or a sign of more pain to come.
After a brief spell above, the FTSE 100 dropped back below 6,700. Healthcare companies including Hikma Pharmaceuticals (LON:HIK) and GlaxoSmithKline (LON:GSK) were amongst the top risers after a broker upgrade to the former and asset sales at the latter. Associated British Foods (LON:ABF) was bottom of the pile, adding to sharp declines yesterday after poorly-received results.
Energy companies Royal Dutch Shell (LON:RDSa) and BP (LON:BP) were the biggest drag on the UK stock market following a report from the International Energy Agency suggesting the supply glut will continue through the middle of next year. That’s a setback from the idea the surplus in oil will have been run off by the end of this year.
There have been several supply disruptions this year, the latest being in the US following storm Hermine. The trouble is that economic growth remains tepid so oil demand hasn’t matched the falling supply.
The British pound was around 1.33 to the US dollar after inflation stats failed to reflect the expected feed-through effect from a weaker pound. Consumer price inflation was unchanged and producer prices rose at a much more modest pace than expected.
Stocks in the US look set for a lower open on Tuesday with Dow Jones pointing towards a triple digit loss. There is some profit-taking with the massive reversal on Monday looking unsustainable in the short-term. Similar projected losses were reversed before the open on Monday.
USA pre-opening levels
S&P 500: 16 points lower at 2,143
Dow Jones: 127 points lower at 18,198
Nasdaq 100: 30 points lower at 4,734
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