Proactive Investors -
- FTSE 100 hit session low of 7,747.09
- Wall Street weak awaiting news on debt ceiling
- Drahi increases stake in BT (LON:BT) to 24.5%, no bid planned
Crude in demand
Oil prices extended Monday's rally after a warning to speculators from the Saudi energy minister raised the prospect of further OPEC+ cuts to support the market, while US debt ceiling talks optimism and hopes for the future demand outlook also added support.
In afternoon trading in London, Brent crude was up 1.6% at $75.66 a barrel, while US West Texas Intermediate (WTI) added 1.5% to $73.15.
Several members of OPEC+ began voluntary production cuts in May which as well as higher US gasoline demand are also expected to tighten supply.
OPEC+ meets again on June 4, and Saudi Arabia's energy minister said on Tuesday that he would keep short sellers "ouching" and told them to "watch out".
"With the Saudi energy minister once again telling speculators to 'watch out' some (short sellers) may have second thoughts," commented Ole Hansen, head of commodity strategy at Saxo Bank.
The gains added to Monday's advance after a 2.8% increase in US gasoline futures ahead of the Memorial Day holiday on May 29 which traditionally marks the start of the peak summer demand season.
US PMIs diverge
US services sector activity surprisingly picked up last month, while manufacturing unexpectedly shrank, according to S&P Global's latest Purchasing Managers' Index (PMI) surveys.
The US service sector PMI increased to 55.1 in May, up from a reading of 53.4 for April, noticeably better than economists' forecast for a reading of 52.6.
But the PMI for factory activity fell to 48.5 in May from 50.2 in April, below the consensus reading of 50.0.
However, a gauge tracking output from both sectors turned higher as well, rising to 54.5 from 53.4, hitting a 13-month high, and total new orders grew for a third successive month, rising at their fastest pace in a year.
Commenting on the latest survey results, Chris Williamson, chief business economist at S&P Global, said: "The US economic expansion gathered further momentum in May, but an increasing dichotomy is evident.
"While service sector companies are enjoying a surge in post-pandemic demand, especially for travel and leisure, manufacturers are struggling with over-filled warehouses and a dearth of new orders as spending is diverted from goods to services."
Ceiling worries
The FTSE 100 index fell back to its opening levels as US stocks moved lower at the open on Tuesday with investors remaining on edge ahead of the country’s fast-approaching debt ceiling extension deadline, seen as June 1.
Around 20 minutes after the opening bell, the Dow Jones Industrials Average had shed 52 points, or 0.2% at 33,233, while the S&P 500 was also down 0.2%, and the Nasdaq Composite shed 0.2% as well.
FOREX.com market analyst Fiona Cincotta said, given the long Memorial Day holiday weekend at the end of the week, the clock is definitely ticking on the debt ceiling negotiations.
“The closer to the X-date, the more we can expect the default risk to show in the market,” she said.
Meanwhile, earnings season continues with Lowe’s adding 1.8% at the open despite reporting a dip in its first quarter sales and slashing its full-year forecast, while Zoom plunged 6.8% despite posting a quarterly earnings beat.