Proactive Investors -
- FTSE 100 little changed, up 2 points at 7,528
- WPP (LON:WPP) cuts outlook on lower spend by US tech firms
- Flutter and Entain (LON:ENT) lifted by Draftkings results
Oil price set for sixth week of gains
The FTSE continues to limp along little changed, 2 points to the good.
Helping to keep it out the red are oil majors, BP PLC (LON:BP) and Shell (LON:RDSa), both up 0.8%.
The oil price has continued to climb after yesterday's gains and is heading for a sixth straight weekly gain - its longest winning streak in more than a year - after Saudi Arabia and Russia extended production cuts into next month.
Brent crude has risen 0.5pc to $85.58, while West Texas Intermediate advanced 0.8% to $82.23 a barrel.
It takes oil’s gains over the six-week span to about 18%
Saudi Arabia said Thursday it would extend its unilateral one million barrel a day oil output cut into September, and that the move could be prolonged further or even deepened.
Russia will also extend its cut into next month, although it tapered the size of the reduction.
Meanwhile, US data this week showed the largest-ever drawdown of crude stock as holdings plunged by more than 17 million barrels, providing further evidence of a tightening market.
One more rate rise seen, policy to remain tight for some time - UBS
UBS expects one more interest rate increase in the current cycle but thinks it will be some time before the Bank of England looks at reducing them.
The Swiss bank was commenting after yesterday’s 25bps increase which took rates to a 15-year high of 5.25%.
The increase was smaller than we had anticipated, but broadly in line with market expectations, which had shifted following a weaker-than-expected June inflation print.
Interestingly, notwithstanding the surprisingly soft June data and several other leading indicators pointing to inflation slowing sharply in the coming months, policymakers pushed back the timing of when they expect it to fall back to target to mid-2025. Moreover, this projection comes with upside risks, UBS pointed out.
UBS reckons this gives a reasonably clear message that the BoE still believes there is more work to do in terms of monetary tightening if it is to get inflation back to target in a timely manner.
With this in mind, UBS continues to look for the BoE to hike again by a further 25bps when it meets in September.
But the August meeting leaves us with little doubt that the BoE intends to keep policy tight for some time.
“So, we may be waiting until the middle of next year before any easing takes place,” UBS suggested.
“Our sense is that the outlook for growth and inflation from here is balanced, with overshoots and undershoots equally likely.”
However, UBS cautioned that should June’s inflation print prove a fluke rather than a turning point, then there is still a possibility the BoE could be hiking into November.
Construction sector grows but housebuilding remains weak
The construction sector returned to growth in July although there remains a split in fortunes across the industry, according to a survey.
The S&P Global/CIPS UK construction PMI posted 51.7 in July, up from 48.9 in June and the highest level for five months.
The rise was led by the strongest rise in commercial building since February and another solid contribution to growth from civil engineering activity.
But, there was another sharp reduction in residential construction activity.
Lower volumes of residential work have now been recorded for eight consecutive months, although the rate of decline eased to its least marked since April.
The sub-index measuring the house-building sector picked up to 43.0 from June’s 39.6, still well below the 50-point mark showing stagnation.
July data signalled a renewed expansion of overall construction output in the UK according to the S&P Global / CIPS UK Construction #PMI which posted 51.7 (Jun: 48.9).Read more: https://t.co/NZ0n62rKb6 pic.twitter.com/uql3gciTN7
— S&P Global PMI™ (@SPGlobalPMI) August 4, 2023
Tim Moore, economics director at S&P Global Market Intelligence said: “July data indicated that some parts of the UK construction sector gained momentum, notably commercial building and civil engineering activity.”
But he noted only “around 35% of the survey panel reported a decline in residential work during July, while only 18% signalled a rise.”