The FTSE 100 again flirted with all-time highs on Tuesday as Middle East tensions sparked a rally in oil, taking London’s oil majors with it.
London’s leading index traded above 8,000 in early trade before falling back to print 7,972 at the time of writing.
“The ongoing rise in oil prices amid a tighter supply outlook is a worry for corporates and consumers as it is a major inflationary force,” said Russ Mould, investment director at AJ Bell.
“A 0.8% advance to $88.08 per barrel puts the commodity price at its highest level since October 2023 and explains why Shell and BP were among the biggest drivers for the FTSE 100 today. Commodity producers account for a large weighting of the FTSE 100 and the index typically does well when these stocks are bid up.”
BP gained 2.8% and Shell jumped 3.2%. Stronger gold prices helped Fresnillo 6% to the top of the FTSE 100 leaderboard. Miners Glencore, Rio Tinto and Anglo American had a good start to week after a strong showing from Asian indices over the long weekend.
In the absence of any major catalysts today, lighter trade in and around the Easter holidays may be what the FTSE 100 needs to break through to record highs. Later this week, the US jobs report will be in focus for any indications of when the Federal Reserve may move to cut interest rates.
“The Federal Reserve will be watching the commodity market like a hawk as part of its decision-making on interest rates. It has a dual mandate of controlling inflation and getting the US as close to full employment as it can. Markets currently believe it can pull off the treble of cooling inflation, managing a soft landing for the US economy and cutting rates,” Russ Mould said.
“If higher oil prices threaten to rock the boat, investors will certainly not want any drama from job figures this week.
“The number of job openings in the US slipped in January and the same is expected again when February’s figures are reported this afternoon. Friday will see further jobs data, covering non-farm payrolls, unemployment and wage growth. Markets will be looking for a figure that is neither too hot as an overheated market might postpone rate cuts, or too cold as disappointing data would increase speculation of a hard economic landing.”
Should this week’s job data strengthen the view that major central banks will cut rates in the near term, one would expect the global equity market rally to continue.
The UK has lagged behind major US, German and Japanese indices in terms of breaking to fresh record highs – but it may soon hit the headlines if the all-time record closing high of 8,014 is breached.
The FTSE 100’s record intraday price is 8,047.
