FTSE loses battle to keep gains

Heading into the close, the FTSE 100 has shed all its gains for the day, as US economic data turns the day sour. 

City of London
Source: Bloomberg

UK markets

Having stepped into February brimming with confidence, the FTSE 100 looks a lot less cheerful as the session winds down. Energy firms did a gallant job of keeping the index in positive territory during the morning, with BP, Shell and BG all moving higher thanks to an impressive bounce in oil prices during Friday’s session.

Tullow Oil left all of them trailing in its wake, rising 9% as some brave (some might say foolhardy) buyers stepped in to lift the shares to the £4 level again.

Ryanair’s warning about oil prices meant that the recent strong performance in easyJet and IAG has come to a juddering halt, but the sector had been ripe for a modest pullback, given the extent of gains in January.

US markets

US manufacturing data failed to live up to the more positive numbers we saw from parts of the eurozone this morning, with the ISM number coming in below expectations. US markets have been very sensitive to any signs that America’s economy is beginning to sputter, and today was no exception.

ExxonMobil did its bit to keep the positive sentiment going where earnings were concerned, reporting figures that beat the headline number. However, the reaction was not a positive one, with one-off factors like a favourable court ruling in Venezuela buffing up the result. The decision to cut stock buybacks is prudent in this environment but still carries the whiff of fear about the outlook for the rest of the year, a viewpoint that seems entirely justified.

Commodities

There are, it appears, signs of hope in oil prices. Friday’s bounce saw the buyers come back in force, buoyed by the rapid closure of oil rigs across the US and apparent improvement in gasoline demand. Oil bulls should keep a check on their enthusiasm however. Given the plethora of bad news on the commodity, any news of a more positive kind is going to spark the beginning of a short-lived bounce, as late-comers to the shorting party find themselves caught out. Sentiment is still firmly bearish however, and the price’s inability to break out of the January range signals more downside to come.

FX

Those hoping for a bounce in the pound on the back of today’s PMI figures were disappointed. The currency is determined to stay within easy distance of $1.50, since widespread low inflation, more anaemic economic growth and an interest rate hike that is months away at the earliest mean that there is little reason to buy the pound.

The dollar stayed quiet following the dire US PMI numbers but this is just a breathing space before the currency motors ahead again, if only on Greek headlines. These are only likely to get more numerous as the finance minister continues his ‘casual fashion’ tour of the continent.

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