Key Points
- FTSE 100 closing price of 6,924.19, -0.65%
- Oil prices gain on demand hopes
- Ethereum reaches record high
- GBP/USD retreats ahead of BoE, Scottish election
- UK manufacturing PMI hits 27 year high
By Samuel Indyk
Investing.com – The FTSE 100 began the day on the front foot, climbing above 7,000 amid a rally in commodities and a rise in travel & leisure stocks before a global stock sell off led the index lower in the second half of the session.
WTI and Brent crude futures both rallied on hopes of a grand global reopening. The European Union said it will begin to relax bans on international travel for the first time in over a year. The UK said they plan to allow overseas travel from 17th May, albeit with a traffic light system for various countries depending on levels of infection and vaccination in those countries. The US again announced the highest number of passengers travelling through its airports since the onset of the pandemic last year.
As economies being to reopen, there is hope that oil demand will continue to increase, despite the ongoing situation in India with record Covid cases. The rally in oil prices helped shares in BP (LON:BP) and Royal Dutch Shell (LON:RDSa) trade near the top of the FTSE.
On the downside, some shares that benefitted from lockdowns struggled. Delivery companies Ocado (LON:OCDO) and Just Eat (LON:JE) Takeaway (LON:JETJ) were near the bottom of the blue-chip index as markets get to grips with the idea of restaurants and bars opening inside later this month.
In the cryptocurrency space, Ethereum hit a record high above $3,500 as Bitcoin’s dominance continues to fall. After being as high as almost 70% at the end of 2021, Bitcoin dominance has now fallen as low as 47%, the lowest since mid-2018. This comes amid extended use of Ethereum’s network compared to Bitcoin. Last week, the EIB issued a digital bond on the Ethereum blockchain and the cryptocurrency is regularly used as payment for NFT sales, which have boomed in recent months.
In FX markets, the USD was mostly stronger with GBP/USD retreating ahead of a big week for the currency. On Thursday, dual forces could impact the pound. Firstly, the Bank of England meets and although they are unlikely to make any changes to monetary policy, data releases have been strong, and the recovery is looking like it could be quicker and stronger than previously thought.
On the other hand, there are jitters ahead of the Scottish parliament elections, which also take place on Thursday. If the Scottish National Party (SNP) sweep to victory and gain an outright majority, calls for another Scottish independence referendum will only get louder. However, even if the SNP gain enough seats to form a majority in parliament, the likelihood of a referendum any time soon is still relatively slim.
On the data front, UK manufacturing PMI was revised marginally higher to 60.9 from 60.7, marking the manufacturing sectors’ fastest pace of growth since 1994. However, the index was also supported by rising costs of raw materials and lengthening delivery times, which is not necessarily a sign of faster growth.
"Price rises were amongst the highest in the last three decades and shortages in some essential materials intensified," said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply. "This in turn lead to customers paying more and at a rate not seen since records began in late-1999. This is likely to filter down to consumers before too long.”