HL commentary as it happens

Oil price rises on escalating Middle Eastern conflict

Brent crude is back over $85.5 a barrel, as escalating tension in the Middle East outweighs fluctuating demand concerns from weaker economic conditions in China. While continued volatility is to be expected, overall, the trajectory in the very near future is more likely to be an upwards trend in the price.

FTSE 100 ends the week on a strong note

The UK market is celebrating some better news on the economic side of things. GDP for the first three months of the year has come in better than expected, showing the UK economy grew by 0.7%, compared to a decline of 0.3% at the end of last year, and better than initial estimates of 0.6%. While hotter-than-expected growth doesn’t help those looking for a faster route to cutting interest rates, it does help to boost overall optimism. The deep-seated productivity problems in the UK are overall a bigger concern than the immediate interest rate outlook, which is why a beat has gone down well. Investors won’t be under any illusion that 0.7% growth is quite high-octane though, even if it does show the economy’s cornering well on what is a difficult track this year.

An interesting component of the top-line GDP number was a 0.4% increase in real household expenditure over the first quarter. That’s a stark increase from previous declines. It shows improved spending on recreation and culture, and includes stronger spending on things including housing and non-alcoholic drinks.

The FTSE 100 is also taking some cues from the US, where trading is being governed by a lack of information. There’s somewhat of a vacuum being created, because of a lack of major macro or company data, meaning all eyes are keenly trained on this afternoon’s PCE inflation figures. PCE is expected to have cooled, as spectators lean towards the possibility of a September rate cut. The political landscape in the region has also become more intense, following a tricky televised debate between President Biden and Donald Trump yesterday, which saw the Republican emerge as the stronger contender, which caused the yield on the US 10-year Treasury note to rebound above 4.3%.

Brent crude slips on unexpected US inventory build

Brent crude has dipped to around $85 a barrel, coming off recent highs, partly reflecting higher-than-expected inventories of the black stuff in the US. Wider demand concerns, following weaker Asian economic data, are also at play. The next catalyst for the oil price will come in the form of US PCE inflation data, which will be an important input for interest rate policy makers.

FTSE has a weak start following volatile US trading

The FTSE 100 is off to a weak start, just about holding off from extending Wedesday’s losses. This follows a relatively choppy trading session in the US, ahead of President Joe Biden and Donald Trump’s closely watched debate in Atlanta later today. There’s also news of a marked slowdown in China’s industrial profits for May, adding fuel to concerns over a protracted slowdown in this important economy.

FTSE 100 opens higher amid uptick in confidence

An uptick in confidence has sent the FTSE 100 higher, after US tech staged a rebound, particularly the chipmaker Nvidia. Fears of a big imminent market wobble are now receding. However, there are still concerns hanging around about stubborn inflation, with a hotter than expected reading in Australia sending the ASX 200 in Sydney lower. Brent Crude has edged up slightly above $85 a barrel, amid continued geo-political concerns, even though there was an uptick in US crude stockpiles. This has raised questions about demand for energy across the vast economy given expectations higher interest rates are going to linger for longer.

Markets hold steady

Although NVIDIA has slipped further away from the position it held briefly as the world’s most valuable company, the wider market hasn’t caught a cold with a mixture of less extreme movements in both directions for the rest of the Magnificent 7. Meanwhile, in other sectors US stocks saw gains in energy, financials and utilities: a vote of confidence by investors in the health of the broader economy.

Asian indices had a strong session overnight, with Japan in particular standing out. In parallel with the US, value stocks led the way. The notable exception in the region was Taiwan, whose economy is dominated by the chipmaking industry.

With few UK corporate or economic updates today, the FTSE 100, as expected, has opened flat.

Brent Crude steady at about $86 per barrel

Brent Crude is holding steady at around $86 per barrel after modest gains yesterday. Intensifying fighting in Ukraine and the Middle East is casting a shadow over the supply outlook. In terms of demand traders are holding their breath ahead of tomorrow’s US inventory figures.