Oil Drops FOMC Up Next

Oil Drops FOMC Up Next

After spending much of the morning in positive territory, the FTSE dropped into the red across the afternoon. Investors continued to assess the spill over effect of the Saudi oil attacks at the weekend. Oil majors benefited from the higher oil prices, whilst oil consumer companies such as airlines and cruise operators remain under pressure. Overall trading was relatively lacklustre as investors eye the FOMC rate decision tomorrow.

After rallying 14% across the previous session, the price of oil was easing on Tuesday. Investors continue to focus on the details of how long oil supply will be disrupted for. Expectations had been that it could take months for oil supply to return to pre-attack levels. However, reports that production could ramp up quickly and return more rapidly than initially expected dragged oil sharply lower. Oil is experiencing heightened levels of volatility and we don’t expect this to ends soon. Traders will remain fixated on recovery time for the production facility, but also on what Trump will do next. Any indication that Trump could retaliate against Iran could send oil prices higher once again. 

FOMC up next

Oil aside, investors are looking firmly ahead to the FOMC rate decision tomorrow. The CME Fed watch tool shows that the market is currently pricing in a 65.8% probability of the Fed cutting rates by 25 basis points. This is down significantly from last week when the stat topped 90%. As US – Sino tensions have eased investors have grown slightly more confident over the prospects of the US economy. The dominant service sector is solid, retail sales impressed and the manufacturing sector, which contracted for the first time in three years is showing tentative signs of recovery. US Manufacturing and industrial production increased 0.5% and 0.6% respectively data showed today.

WeWork cancels IPO

WeWork cancels IPO. After weeks of will they won’t they, WeWork has pulled its IPO amid a lack of interest from investors. Once burnt twice shy – following from the disasters that were Uber and Lyst, it is hardly surprising that institutional investors were giving WeWork a wide birth. As with Uber and Lyft concerns over growing losses and complex corporate structure are keeping investors away. 

Euro gains as sentiment improves

On the currency markets, the pound declined versus the euro. Whilst the UK Supreme Court is assessing whether Boris Johnson illegally suspended Parliament, Brexit is no closer to being resolved. The ticking clock weighed on the pound. The euro, however, was in demand as economic sentiment in the eurozone and Germany showed signs of improvement after months of wallowing.