Oil stages swift reversal
|Sterling is still hitting UK assets, which have been under pressure this afternoon, while US markets endure a mixed day thanks to more oil volatility.
- Oil drops on Saudi output hopes
- Fed & OpEx keep traders on edge
- Pound advances for a second day
For a second successive day, oil price movements have dominated the news. This time around it is a sudden drop in the price of crude, as reports suggested Saudi Arabia was much closer to restoring at least some production from the facilities attacked over the weekend. Arguably Monday’s spike in oil was unsustainable, since oversupply concerns have been the much more dominant theme this year, but the sudden drop came earlier and quicker than expected. Oil movements have not been the only element keeping sentiment in check. A rather messy repo operations by the New York Fed will have focused attention on the funding strains in US short-term debt, and raise fears that there is more to worry about under the surface than that currently suggested by US equity markets, which remain within easy distance of record highs. Indices still show little inclination to close the gap down from Monday, especially with a Fed meeting on the calendar for tomorrow and options expiry on Friday. As a result, volatility could be concentrated at the end of the week.
Sterling strength continues to hit UK assets hard, with losses across the FTSE 100 broad-based and not confined to any one sector. Despite the PM’s abortive press conference yesterday in Luxembourg, markets appear content to think some progress has been made. Either that or the substantial short positions on the pound are still being pared back, with the Fed meeting tomorrow and potential dollar movement inevitably playing its part here too.
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