Oil deal sees equities flow higher

In mid-morning trading, the FTSE 100 is 70 points higher, as oil and mining stocks lift the index, while Capita slumps to the bottom.

• Raw materials sector surges

• Capita’s warning sends investors running for cover

• US session filled with data and Fed-speak

The overnight news from OPEC has revived risk appetite, with investors returning in droves and finding particular bargains in the oil sector.
BP and Shell between them comprise nearly half of the gains to the index in terms of points, as these stocks suddenly look a lot more attractive based on improved expectations for oil prices. Miners are pushing strongly higher as well, as the shift back to risk assets benefits these growth plays. The index would be even higher were it not for Capita, whose profit warning has wiped almost a third off the stock. Outsourcers have been left in the cold following the EU referendum, with Capita already significantly underperforming the FTSE 100 since the vote, even before today’s nose-dive.

OPEC’s surprise decision to cut output has given oil markets a remarkable fillip, with the hope that more will come at the November meeting undoubtedly playing a part. The news has seen Brent and WTI rally substantially, although from a there is still work to be done to get back to the highs of the year. Expectations of a bigger cut to output later on in the year, ideally with Saudi Arabia and Russia, the two biggest players, doing their bit, could see oil reverse its traditionally weak performance in the fourth quarter and push higher. It turns out that OPEC members can agree, and no doubt oil companies and their investors will be hoping that this outbreak of amity continues into the end
of 2016.

Markets are gearing up for a busy day of US data, with core PCE, GDP and home sales all on the ticket, with two more Fed speakers thrown in to add to the excitement. The OPEC news broke before US markets closed, so most of the reaction took place in the immediate aftermath, and so a quieter start is expected. Ahead of the open, we expect the Dow to start at 18,341, up 2 points from last night’s close.