Oil slick sees FTSE slide

Oil prices and Pearson pull the FTSE 100 down, as the BoC keeps its rates unchanged as a new PM raises fiscal expectations.

London Stock Exchange
Source: Bloomberg

European markets struck a somewhat mixed tone today, as the DAX punched to a new monthly high, contrasted by a sharp move lower in the FTSE. The UK index is held back by a circa -15% move in Pearson, alongside a continued slide in oil prices. The European markets have been mixed over the past week, with little certain directional trend. However, as we approach tomorrow's ECB decision, there will no doubt be a degree of hesitancy among the trading community as positions are trimmed ahead of such a key market-moving event.

The Bank of Canada decided to keep rates steady at 0.5% as expected this afternoon. Following the appointment of Justin Trudeau as PM, this new anti-austerity leader represents a likely expansion to Canadian fiscal policies and thus it seems prudent for the BoC to remain steady until it gets a better idea of the direction of the country.

US oil inventories continued to rise, following yet another 8 million barrels being added to US stockpiles. Today's release represents the fourth consecutive weekly build; the first time since early April. Coincidentally, today's 8 million barrel build up was also the biggest weekly rise since that same week six months ago. Despite substantial reductions in US rigs and output, this build up is largely related to the current maintenance season, which sees imports rise and domestic surplus going into storage. For this reason, the reaction to such a notable number has been relatively muted.

The Ferrari IPO was no doubt the main event of the day, with the Fiat spin-off proving to be a welcome distraction amid earnings season. The circa 6% bounce shows there is substantial interest for such a traditional and reputable brand. For Fiat, it has now accessed a new pool of liquidity to service its substantial debt ahead of a possible 2016 GM merger.

For new Ferrari shareholders, there will be substantial interest in exactly where the company goes from here. The decision to list the iconic firm as its own entity will mean substantial speculation and scrutiny over how the firm will grow its profits and increase shareholder value.

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