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As oil goes, so goes the rest of the market. Yesterday a rapid decline in crude paved the way for stock markets to give up their gains, but today the price of black gold is on the up again, with the reliable market rumour of production cuts providing the foundation for both Brent and WTI to move back above $31 a barrel. At this point, a decision between OPEC and non-OPEC members to cut production is not the important element; the key point is such talk allows the price to move upwards to a position where bears can hit the ‘sell’ button once again. Rallies in oil in recent months have only lasted a few days, and once talk of a deal dries up, the way will be clear for the downtrend to resume.
Anglo American sits at the top of the index today on hopes that diamond sales will help to offset the bear market in other commodities. For now the share price seems to have found a bottom just above £2, but whether this proves to be a base for future gains will depend on whether Chinese demand for other metals picks up soon.
Central banks continue to dominate attention, with Mark Carney speaking to MPs today. His hints that a rate cut, rather than a hike, might be the next move went gloriously unnoticed by GBP/USD, which perhaps indicates how aggressively short markets have been of this currency pair. Or, it could suggest dollar weakness ahead of the Fed is the key driver; given how others like the European Central Banks have moved back to dovishness, perhaps we may see Janet Yellen give a little on the hiking forecast for the year. Such a move would need to be done carefully, to avoid giving the impression the Fed is once again worried about US economic weakness.