Rally rumbles on as oil flies

As the week draws to a close, stock markets are racing higher, with the FTSE gaining 150 points as the final bell looms.

London Stock Exchange
Source: Bloomberg

Thoughts of doom and gloom, which so dominated the first half of the week, have been banished as investors take the opportunity to buy up anything that isn’t nailed down. With all the negativity that drove the downward moves in the first half of the month, it has not been surprising to see an upward surge that has been as remarkable as the sell-off that preceded it.

The key question now is whether the broader investment backdrop has changed as a result of the European Central Bank’s meeting yesterday, and whether the coming Fed meeting will lead to any backtracking on the previous forecasts from US policymakers that four rate increases are the likely outcome in 2016.

Shell sits at the top of the London board  today, helped by the first real bounce in oil prices in weeks. This accords with the existing idea that oil moves are key drivers of risk sentiment, and further gains in Brent and WTI could help to make life easier for equity bulls.

Earnings season moves into high gear next week, with the tech heavyweights of Apple and Facebook issuing their latest figures, while in the UK updates from Antofagasta and Anglo American will throw more light on the beleaguered mining sector. As well as the Fed on Wednesday, GDP numbers from around the world will be vital in assessing whether central bankers should continue to be worried about the global outlook. 

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