Market Report: Oil spikes on new Russia sanctions
Steve Clayton, head of equity funds, Hargreaves Lansdown: “It’s a quiet start to trading in London this morning, with the FTSE100 opening around 0.1% higher at 9529. The Q3 reporting season is getting into full swing with a huge raft of trading updates out this morning. So far, it is London Stock Exchange Group (LSEG) and Rentokil that are grabbing the spotlight. Rentokil has soared 13% in early trade after saying that trading in their key US pest control division is improving. LSEG shares are up 6% after reporting a strong period of growth, a boost to margin guidance accompanied by news of an investment by a consortium of banks into its Post Trade Services division and a new £1 billion share buy-back programme.
Oil markets have spiked higher after news emerged that the US was putting Russia’s major oil producers, Rosneft and Lukoil, under sanctions due to the Kremlin’s failure to move toward peace in Ukraine. Brent crude has climbed 4% to almost $65 per barrel on the news, marking a dramatic recovery from recent weakness in crude markets. America’s new stance is in stark contrast to recent messaging from the White House and took markets by surprise. The effectiveness of the sanctions is yet to be proven, but President Trump has said that the Indian PM Narendra Modi has assured him that India will cease Russian oil purchases.
The US/Sino trade spat continues, with reports of curbs on sales of US software to China being under consideration. Scott Bessent, the US treasury secretary has said ‘everything is on the table’ and expected that controls over critical software sales would be a co-ordinated effort by G7 nations. The move marks the latest escalation in the rare earths dispute, with the US and its allies looking to apply pressure upon China in the hope of reversing the export controls that China recently announced on sales of these critical minerals.
Gold is rallying in early trading this morning after a hugely volatile week. The yellow metal’s price bounced 1.5% to $4,126 in early morning trading, marking a recovery from earlier weakness. The price of gold is still up more than 55% from where it began the year, but this week has seen the yellow metal retreat from an all-time high of $4,381.5 per oz reached on Tuesday. The price has been supported by worries over the quality of government bonds in an era of huge deficits, the fractious state of international relations and signs that inflation is proving stubborn.
In the currency markets the Japanese Yen is weak across the board as traders fret over new prime minister Sanae Takaichi’s fiscal plans. The Yen has dropped to 152.5 against the dollar, marking a decline in Japan’s currency of almost 10% over the last six months. Sterling is holding steady against the major currencies this morning, standing at $1.335 and €1.151 in morning trading.”