Proactive Investors -
- FTSE 100 on the front foot, up 23 points
- AstraZeneca (NASDAQ:AZN) falls as trial results disappoint
- Oil price spikes as Saudi extends production cut
Oil price spikes as Saudi extends production cut
The oil price has spiked after the Saudi Ministry of Energy said the voluntary cut of 1mln barrels per day, which began in July, will be extended to cover August.
This means the Kingdom’s production for the month of August 2023 will be approximately 9mln barrels per day, down from around 10m ln bpd in May.
Russia is also planning to cut crude export flows next month in an effort to keep the global market balanced
Deputy prime minister Alexander Novak revealed Moscow would cut half a million barrels per day off its output, saying: Russia will voluntarily reduce its oil supply in the month of August by 500,000 barrels per day by cutting its exports by that quantity to global markets.”
Brent crude rose 0.8% to US$76.02/barrel while Wst Texas Intermediate also traded 0.8% to the good at US$71.15.
Banks rally as analysts highlight value
UK banking stocks are enjoying a strong start to the week after recent falls as rising interest rates spark fears of an economic slowdown.
Analysts at Jefferies see value in the sector after conducting an analysis of household data including a look at consumer credit loss modelling.
The broker concluded that for the UK's top-four income deciles, accounting for 70% of mortgage debt, the burden of rising rates is manageable (assuming all mortgages reprice to 6%) with no knock-on impact on discretionary spending.
It sees unemployment as the most significant medium-term factor on credit risk while in the near-term the issue is balance sheet size amidst mortgage repayments/deposit outflows.
“Our loss modelling concludes that whilst loss rates are expected to move modestly higher in '24, the ultimate driver of loss is unemployment, and we do not see this being of material earnings consequence until the unemployment rate surpasses 5%,” Jefferies said.
It has buy rating on Lloyds (LON:LLOY), Barclays (LON:BARC), NatWest (LON:NWG), HSBC (LON:HSBA) and Standard Chartered (LON:STAN).
The broker did lower its price target for NatWest to 380p from 420p.
Barclays reckons deposits remain the key sensitivity for UK banks with outflows and rising betas ongoing risks.
“But our new work on current account stickiness and mix shift shows resilience longer term, underpinned by a stronger hedge tailwind,” it said.
“We see Lloyds best placed, offering compelling value for those willing to be patient.”
The broker kept an overweight rating but trimmed its price target to 70p from 75p. It has an equal weight rating on NatWest but cut its target to 360p from 380p.
Shares in Lloyds, NatWest and Barclays rose 1.7%, 1.9% and 1.9% respectively.