Weekly round up
Stock News Highlights
May 2022 has been a challenging month for equity markets, however, UK markets are beginning to look more positive, with the FTSE 100 Index rising by 1.5% during the past week to end at 7,574 points at the time of writing.
Chancellor Rishi Sunak has unveiled a £15 billion package to help alleviate the strain on household energy bills this week, funded partly by a controversial 25% windfall tax on oil and gas giants. More than 8 million households on the lowest income will now get £650 to help them with rising energy bills.
In addition, 8 million pensioner householders will get a one-off payment of £300, as well as a one-off £150 payment for people receiving disability benefits. People in this group will also receive the £650 for those on the lowest income. Sunak added that the £200 announced in February to help people with their energy bills will be increased to £400, and this will be a grant rather than a loan to be repaid over five years.
The British Pound rose above $1.26, close to its highest in four weeks, based on optimism that the new cost of living support package will help boost consumer spending. The British people have been struggling with inflation at 40-year highs and the latest data pointed to recession risk, giving less room for the Bank of England to hike interest rates further.
In the commodity markets, Brent crude futures traded around $118 per barrel on Friday and are set for a weekly gain, lifted by persistent concerns about tight global supply. Energy Information Administration data released on Wednesday showed a larger than expected drawdown in US crude inventories last week due to soaring exports, highlighting a tight global market.
Meanwhile, the EU continues to haggle with Hungary over banning oil imports from Russia, with the European Council’s Charles Michel saying he is confident that an agreement can be reached before the council’s next meeting on May 30th. Elsewhere OPEC+ is widely expected to stick to last year’s oil production deal at its June meeting and raise July output targets by 432,000 barrels per day.
Gold traded close to $1,860 an ounce on Friday and is on track for its second straight weekly gain, benefitting from recent weakness in the dollar. The dollar weakened against a basket of major currencies as investors lowered Federal Reserve rate hike expectations amid signs the central bank might slow or even pause its tightening cycle later this year.
US equity futures rose on Friday after a broad rally on Wall Street on Thursday, with the major averages closing higher. US stocks rebounded with support from strong earnings results in the retail sector, while minutes from the Federal Reserve’s latest meeting reduced investors’ concerns of aggressive tightening measures to fight inflation. On a weekly basis, the Dow Jones is up 4.4% so far and is on track to break an eight-week decline. The S&P 500 and Nasdaq are also up 4% and 3.4% respectively this week and are set to snap seven straight weeks of losses.
Meanwhile, fresh economic data showed the American economy contracted more than expected in Q1, falling by an annualised 1.5% on quarter in the first three months of 2022, with the biggest drag coming from trade. The number of signed contracts to buy existing homes in the US declined 3.9% in April, a sixth consecutive monthly drop, and pushing contracts to the lowest level since April of 2020, as escalating mortgage rates have bumped up the cost of purchasing a home.
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