Volatile US markets keep Europe on its toes

Oil stocks and miners are leading the FTSE risers this morning after BP reported a doubling of quarterly profits and the best underlying results in over five years.

This year’s rising oil prices have worked in the oil giant’s favour, though the company kept its production level flat. But this morning the crude price started heading south, albeit slowly, undeterred by the Iran sanctions which will kick in next week. Saudi Arabia’s promise to the US to keep production levels up in the face of a potential supply freeze is keeping a cap on any panic buying.

FANG drop and Trump’s new China threats weigh on stocks

Despite the FTSE’s positive open today’s session could turn fairly volatile as US markets Monday registered one of the largest intraday drops in months. The revered FANG stocks were in the centre of the decline, losing a combined $200 billion in value over two trading days. President Trump’s fresh threats to impose more tariffs on China didn’t help even though they were tampered down with offers for a new “great deal”. While bad for shares, the comments boosted the dollar to an almost ten-week high with the greenback attracting some safe haven buying amid concerns that an escalation of the trade tensions with China would be a drag on the global economy.

Pound between the budget and the BoE

The pound remained unimpressed by yesterday’s budget in which the Chancellor Philip Hammond declared the end of austerity and promised tax cuts. There is a deep sense that a no-deal and hard Brexit solution would make most of the Chancellor’s plans null and void, instead the bigger impact on the currency and bonds will come from the Bank of England’s rate setting meeting next week. A no-rate-change decision seems to be a given but if Mark Carney manages to convey a sense of preparedness for a no-deal Brexit he may be able to calm the markets sufficiently to avoid volatility. Treading water until the BoE news and some clarification on the future of Italy’s budget, sterling weakened 0.11% against the dollar and 0.14% against the euro.