Volatile afternoon sees FTSE gains unwound

The FTSE seen a highly volatile afternoon, as a pound-fuelled rally has been swiftly undone by a deterioration in the energy markets.

• Pound tumbles after Hammond comments

• Russia opposition undermines OPEC oil cut

• Commodity firms lead the way, after positive Anglo American figures

The pound fell heavily this afternoon, as Phillip Hammond chimed in with dovish comments ahead of today’s appearance from Mark Carney. Much of what Hammond said was fairly intuitive, with the statement that further sterling devaluation would impact inflation expectations providing nothing more than simple economic theory. However, we are now in a situation where robots are likely to act on any dovish statement and given the lack of buyers, everyone is pretty happy to jump on a freefall in the pound. Such a sizeable drop was always likely to push FTSE 100 valuations higher, as internationally based firms face the prospect of further FX driven profit revisions.

Rumours of Russian opposition to the recent oil cut has sparked a plunge in crude prices, dragging the FTSE along with them in the later part of the session. Coming just a day after Iraq refuted plans for a cut to their crude production levels, the unwillingness of Russia to reduce output would be a blow to the hopes of a deal.  While Russia is not an OPEC member, it is less likely that Saudi Arabia will want to lose market share against large players such as Russia and the US.

Despite the late crude selloff, it is commodity firms which dominate the gainers today, with Anglo American helping to provide a leg up for the likes of Glencore and Rio Tinto, all of which were amongst the biggest risers on the day. Despite recent dollar strength, we have seen a remarkable recovery for commodities, driven by hopes of a resurgence in Chinese growth. With rising commodity prices comes upward revisions to revenue and profits, which are likely to be reflected once more when other major miners provide their latest trading statements.