The FTSE 100 led the gains in early trading in Europe as results from BP (BP) lifted the heavyweight by 1.6 per cent, while heavier weight Shell (RDSA) followed suit. Profits at BP rose to $12.8bn, the highest in eight years on higher oil prices and cost cutting efforts. It marks a sharp turnaround from the loss reported in 2020 due to oil demand destruction due to coronavirus restrictions. Fourth quarter earnings were above forecast. It comes as the Treasury has reportedly pushed for six new North Sea oil & gas fields to get the go-ahead... the energy price crunch has persuaded at least some of those in power that pursuing net zero at all costs is a burden on ordinary people that wasn’t thought through. After initial gains, shares in BP pared gains as investors digested the results and comments from CEO Looney more fully, pulling the FTSE back from its high. On a related note, SSE (SSE) rose over 1 per cent as rising power prices encouraged it to lift its outlook.
Nevertheless, the FTSE 100 has emerged from the recent turbulence in global stock markets to hit its highest since the pandemic. The lack of exposure to speculative tech names like Ocado has been a positive for the UK market as the great unwind from this bloated corner of the market takes place in the US. The FTSE 100 has outperformed in 2022, rising over 3 per cent whilst the DAX (–3.5 per cent), Dow Jones (-3.5 per cent) and S&P 500 (–6 per cent) have all fallen. The Nasdaq Composite is down over 10 per cent still. We’d talked up the FTSE being the place to be for the rotation from growth to value – question is whether we see a double top around this 7,600 area or if there are legs to drive on to 7,700 to fully recover the pandemic losses.
Across the Stoxx 600, chemicals, basic resources, autos, utilities and food & beverage all rose about 1 per cent in early trade. Broad-brush gains, risk reasonably well bid although we are seeing the dollar come back… chiefly it seems on EUR bears gripping hold of the EURUSD cross. The US 10-year yield is nudging closer to 2 per cent. Lagarde spoke yesterday, less hawkish. Also worth pointing out that Knott – among the most hawkish – only called for one hike by the end of the year…market pricing in more. Germany’s 10yr bund yield jumped top its highest since January 2019 at 0.252 per cent this morning before sliding sharply back to where it started. Bund-BTPs spreads continue to widen.
Cathie Wood is launching a new ETF made up of private companies and illiquid stocks...perfect. Make mark to market great again. Pesky things like public markets and liquidity be damned! ARKK filed for a new fund that will focus on “illiquid securities and securities in which no secondary market is readily available, including those of private companies.”
Neil Wilson is the Chief Market Analyst at markets.com
