Weekly Round Up
UK markets saw a strong recovery this week after last Friday’s late sell-off, with the FTSE 100 Index gaining 2.38% to 7,066 points at the time of writing.
The Bank of England left interest rates and quantitative easing steady and said that the case for modest tightening strengthened in August, while cutting growth forecasts for Q3 to 2.1% from a prior estimate of 2.9%. The ongoing natural gas crunch that has led to industrial companies to lower output levels, has weighed on growth forecasts.
Bearish sentiment returned at market open on Friday as China’s Evergrande jitters made a comeback, the property giant remained silent on whether it will pay interest on dollar-denominated bonds. Meanwhile, HSBC reassured markets that the bank isn’t concerned about the indebted property developer and its exposure to Evergrande is limited.
In the commodity markets, WTI crude futures traded around $73.4 a barrel on Friday, the highest since the beginning of August. Markets are on track to jump around 2% weekly, boosted by growing fuel demand and falling US crude inventories. EIA data showed US crude stocks fell by 3.5 million barrels to 414 million last week, the lowest since October 2018.
Meanwhile, almost 16% of the Gulf of Mexico’s oil production remained offline after the impact of two hurricanes, while some members of OPEC+ have struggled to raise output following under-investment or delays to maintenance work. Iron ore extended its losses towards $100 per metric tonne, less than half of its record high of $230 hit in May and the lowest level since July of 2020, on concerns over demand in China.
US stock futures fell slightly on Friday after Wall Street rallied for the second straight day on Thursday, with the S&P 500 Index and the Dow Jones Industrial Average both on course for weekly gains.
In recent data, the flash Markit PMIs pointed to a slowdown in both US services and manufacturing in September. Market participants continued to digest the latest FOMC statement, as the Federal Reserve said it could start tapering as soon as November and end next year, but also left the door open to more stimulus if the economy needs it.
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