The FTSE 100 gained on Thursday as higher oil prices helped BP and Shell contribute a significant number of points to London’s leading index.
BP shares were 2.9% at the time of writing, while Shell added 1.7%. After a slow start to the week, the FTSE 100 was playing catch up with global equity indices that have so far produced notable gains driven by interest rate hopes.
The FTSE 100 was up nearly 1% shortly before 2pm on Thursday.
OPEC+ are meeting to discuss supply quotas with early reports suggesting they will commit to a 1 million barrel per day production cut. Brent oil was up 1.3% to $84.25 at the time of writing.
The FTSE 100 has been held back this week due to its weighting to commodities and global financial institutions that won’t share in the benefits of lower interest rates hinted at by US central bankers.
The S&P 500 has had a comparatively better week and is set to close the month with its best performance of the year so far.
“US indices are on course to chalk up their best month of the year in November. Data points and commentary from the Federal Reserve have largely reinforced the idea that the current rate hiking cycle is at its end,” said AJ Bell’s Russ Mould.
“It now feels like the market is waiting for the next big kicker to push it higher with forthcoming US jobs figures, inflation readings and central bank meetings as potential catalysts.”
US bond yields continued to fall on Thursday, providing additional support for US stocks, which were set to open higher. High-profile investors are betting on a rate cut in q1 2024, much sooner than the current expectation of June 2024.
Anything that fuels the fire of speculation around interest rate cuts sooner than market pricing will be supportive of equities, although it may not be overly helpful for the FTSE 100’s big banks, such as HSBC and Standard Chartered.
Risk on rally
There was a clear risk-on rally underway on Thursday, demonstrated by the positioning in FTSE 100 shares.
Miners, banks, and housebuilders rallied while utilities and consumer staples slipped. Severn Trent was the biggest faller as the company traded ex-dividend.