Wariness returns amid Middle East tension and inflation uncertainty
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Wariness has returned at the start of the week, as investors assess the risks of geo-political conflict, amid fresh signs of global economic slowdown and uncertainty about the trajectory of inflation. Such are the risks of the Israel-Gaza conflict widening, US Secretary of State Antony Blinken has embarked on a whistlestop diplomatic tour, in an attempt to calm inflamed tensions. It comes after Israel’s defence minister described the hostilities the country is facing as an axis rather than a single enemy. Concerns are rising that this could lead to fresh violence, particularly in Lebanon.
Oil prices dip back
Oil prices have been fluctuating, as fresh concerns about the Middle East have been brewing, amid worries about supply issues in the region, particularly given the attacks on tankers in the Red Sea. For now, focus has switched to signs of a dwindling appetite for oil globally, which have pushed down a barrel of Brent Crude to below $78. Saudi Arabia has flagged that it is seeing softening demand, prompting it to cut crude prices for buyers in all regions in February.
UK jobs market weakens.
There are signs it is getting tougher in the UK jobs market, as employers grow more cautious, given the flagging UK economy. According to the latest snapshot from KPMG and the Recruitment & Employment Confederation, the number of jobs vacancies fell for the third time in the last four months. This will be fresh food for thought for Bank of England policymakers, who have been concerned about stubbornly high wage inflation. If there are fewer open positions available, current and potential employees will have less bargaining power, which could help with wage restraint going forward. While this data alone is unlikely to change views round the table at the Bank of England, it’s another piece of the puzzle potentially pointing to earlier rate cuts here in the UK this year.
US economy in focus.
A breakthrough in talks to avert a government shutdown is reassuring, but the spending deal agreed by Republican and Democrat leaders still needs to pass Congress. With Friday’s jobs data showing that the US economy is still showing considerable muscle, expectations had been rising for a rate cut as soon as March, but they have now retreated a little. The markets are still pricing in as many as six rate cuts this year, while the dot plot plan from the Federal Reserve has only three pencilled in. All eyes will be on the latest CPI data out on Thursday, which will be a temperature check for inflation. There are still hopes for a soft landing for the US economy, but the cumulative effect of high interest rates have not yet been felt and there could be plenty of snags to rip the American parachute as it heads downwards. The first big banks begin reporting results on Friday, and there is some nervousness ahead, given that companies need to continue to come up with sturdy numbers to justify high valuations, and outlook guidance will be watched closely.
Boeing turbulence
Boeing starts the week with another big bout of turbulence, with the safety of its 737 Max 9 planes under question. 171 were grounded after part of an Alaskan Airlines’ aircraft fuselage fell off on Friday, causing disruption to thousands of passengers. The Federal Aviation Administration has launched inspections of each plane and its unclear just how long they will be out of action for.
The company’s share price is under pressure as investors assess this latest set-back, and it faces a new bout of regulatory scrutiny, just as it was hoping to get approval for further models of the jet. Shares have struggled to recover from an earlier grounding of the 737 Max jet after two fatal crashes, and the disturbance caused by the pandemic.
BT street charging aims
Range anxiety could soon be in the rear-view mirror, given plans to set up thousands more on-street chargers in the UK. The plan from BT to convert electrical cabinets, which house cabling surplus to requirements, into EV chargers will be a cause for celebration for drivers hoping to swerve into the green revolution. Up to 60,000 could be converted across the country which would help tackle a shortfall in electric car chargers and would be particularly beneficial for those motorists who can’t connect at home. This could potentially be a large step forward in reaching the government’s ambition to increase the number of public charge points from almost 54 thousand today to 300 thousand by 2030. Already, over the last year the number of charge points has increased by 45%.”
