FTSE 100 gains as oil jumps on Middle East escalation

The FTSE 100 reversed some of yesterday’s losses after hotter-than-expected US CPI data raised questions about the timing of the Federal Reserve’s first rate hike.

European stocks finished yesterday’s session deep in the red, but a late rally in US stocks from their worst levels boosted sentiment on Friday. Comments on inflation by the European Central Bank’s President also helped ease concerns about interest rates.

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“Wall Street managed to avoid a big sell-off despite hotter than expected US inflation figures reducing the chances of interest rates being cut as soon as March,” said Russ Mould, investment director at AJ Bell.

“European shares raced ahead at the end of the week as investors focused on comments from European Central Bank (ECB) President Christine Lagarde who implied the worst was over with inflation in Europe, stoking hopes for rate cuts from the ECB.”

Oil jumps

Although UK GDP growth for November came in better than expected at 0.3% compared to estimates of 0.2%, the real driver of the FTSE 100 on Friday was higher oil prices and gains for oil majors Shell and BP.

The two added a substantial number of points to the FTSE 100 index as Brent oil jumped over 3% to $80.29. The UK and US launched a wave of attacks on the Houthis in Yemen, sending oil prices soaring higher on concerns about supply disruption in the region.

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“Iran has captured an oil tanker off the coast of Oman in response to sanctions, according to reports. Air strikes on Houthi targets in Yemen have also increased anxiety,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

Burberry

Burberry was the FTSE 100’s biggest casualty on Friday after the luxury brand released disappointing sales numbers for the 13 weeks to 30th December 2023. Sales in the Americas and EMEA were abysmal, and Burberry’s reported revenue fell 7% amid a broader decline in luxury demand.

Burberry shares were down 8% at the time of writing.

JD Sports was the top riser, gaining 3%, with shares at 110p proving too attractive for bargain hunters. JD Sports is still the worst performer of 2024, declining 31%, after issuing a warning on profits last week.

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