The OECD warning that the UK faces years of stagnant growth has done little to dampen sentiment for the FTSE 100, with energy stocks leading the push higher.
FTSE 100 leads the gains despite OECD growth concerns
“European markets have provided an area of optimism today, with equities outperforming their US counterparts despite growth concerns raised by the OECD. Quite how much markets are listening to the OECD is questionable, with both the FTSE 100 and pound gaining ground despite claims that we will see a measly 0.2% 2024 after next year’s contraction. While the effects of Brexit have been largely masked by the Covid pandemic, the outlook remains bleak over our ability to grow our way out of this current crisis. Nonetheless, with the Bank of England likely to take a more accommodative stance once inflation is brought under control, the ability to predict when the UK returns to health will be reliant on driving down prices. Unfortunately, the OECD predict that the UK energy price cap will serve to lift inflation, thus limiting the ability to combat the stagflation that is expected to dominate 2023. ”
Saudi comments help drive energy outperformance
“Energy stocks have managed to push to the front of the queue today, with rising crude oil prices helping to lift the sector on both sides of the Atlantic. Yesterday’s comments from the Saudi Energy Minister have served to highlight their unwavering desire to lift energy prices, with the rebuttal of claims they planned to lift output also accompanied by a commitment to further reduce production if necessary. For oil traders, the importance of OPEC’s desire to support prices has been somewhat lessened thanks to a wave of Covid restrictions in China as Beijing cases reach record highs. The complete reopening of the Chinese economy does allow energy bulls a degree of optimism over the medium-term, but recent moves to remove restrictions look to be a false dawn for now. ”
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