The FTSE 100 rose on Monday as falling oil prices eased fears of a prolonged period of higher inflation after major central banks raised borrowing costs last week.
Brent Crude oil fell 2.9% to trade below the $100 mark on hopes of a diplomatic resolution to the US/Iran conflict.
“Markets are starting the week on a more constructive footing, with falling oil prices helping revive risk appetite after several weeks dominated by inflation and interest-rate concerns,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
“Lower oil is taking some pressure off the inflation narrative at precisely the moment markets are digesting a renewed global tightening cycle. The Fed raised rates last week and left further increases on the table, while the ECB and BoJ have also tightened.”
But the relief of falling oil prices may be short-lived for the FTSE 100 and other major indices. Trump is warning that he will ‘blow entire nation up’ if talks with Iran don’t prove fruitful, so it looks like the merry-go-round of military attacks and diplomatic posturing will continue.
Nonetheless, the FTSE 100 rose nearly 1% on Monday with cyclical stocks leading the charge. Equity traders’ good mood was evident, with 87 of the FTSE 100’s constituents trading higher at the time of writing.
Miners were among the best performers, with Metlen Energy and Metals jumping 5% and Antofagasta leaping 4%. Metlen was the FTSE 100’s top riser. Anglo American rose 3.8%.
JD Sports made an interesting announcement about expansion plans into Mexico that, while not immediately market-moving, will help strengthen the investment case in the coming years.
“JD Sports is to expand into Mexico via a franchise agreement. While the sports retailer is already established in multiple countries, it’s always a risk going into a new territory as there is inevitably a difference in how business is done, as well as from a cultural perspective,” said AJ Bell investment director Russ Mould.
“Using a franchise partner who already knows the territory inside out is a lower risk way for a brand like JD to dip its toes in the water. The key question is why JD Sports hasn’t already expanded into Mexico, given it has a large population with millions of people who match its target audience by age.”
Airtel Africa was the FTSE 100’s top faller as disappointment around the scaled-back IPO of Airtel Money persisted.