The FTSE 100 fell on Tuesday after an attack on a key Saudi oil pipelines sent energy prices soaring, raising fears of a series of damaging interest rate cuts.
Brent Crude oil was trading at $107 at the time of writing.
“There’s no let-up in the volatility rippling through financial markets, with energy prices staying painfully elevated and worries swirling about the knock-on effect for inflation and interest rates,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“A sea of red could be set to wash over indices, just as attention turns to the Red Sea and mounting threats to shipping and oil exports.”
The FTSE 100 managed to sidestep much of the concern around AI yesterday but wasn’t able to dodge the impact of higher oil prices and lost 0.6% in the early stages of Tuesday sessions.
Overnight, the S&P 500 closed down by 0.48% while the tech-heavy NASDAQ closed down 0.58% as investors digested calls for enhanced AI safety measures and a slow down in the pace of developement.
However, the losses in some of the tech names may not have been as dramatic as the naysayers would have you believe. Neoclouds Nebius and Coreweave fell 5.5% and 6.75%, respectively – clearly not great days for the stocks, but we’ve seen bigger moves in recent months. SpaceX closed down 2%.
Just as the FTSE 100’s digital and data contingent rallied yesterday, US software stocks gained overnight on hopes a slowdown in AI development could ease potenital disruption.
But these names were lower on Tuesday as selling picked up acorss the board in London. Most FTSE 100 stocks were weaker at the time of writing.
Financials, banks and miners were among the heaviest hit. Aberdeen was the FTSE 100’s top faller.
UK-centric stocks were among the best performers with Kingfisher topping the leaderboard following UK jobs data.
The week isn’t set to get any easier for equities as attention shifts to tomorrow’s US interest rate decision when the Federal Reserve is likely to increase borrowing costs.
“Even without some of the world’s biggest tech companies calling for a slowdown in AI development and a ratcheting up of tensions in the Middle East, this week was always going to be a tricky one for markets to navigate,” said AJ Bell head of financial analysis Danni Hewson.
“Central bankers in the US and UK have been perched on their respective fences for months as inflation simmers, and this week could well see those at the Federal Reserve forced to make a move that will undoubtedly anger the president.”