The FTSE 100 dipped on Tuesday as Monday’s support from higher oil prices quickly evaporated. Oil majors were among the top fallers as oil prices erased all of the gains made yesterday on the back of OPEC’s production cut.
The FTSE 100 was trading at 7,575, down 0.3% at the time of writing.
Oil prices fell with stocks and the dollar after US ISM Services missed expectations. The miss suggests the US economy is starting to slow.
“The week’s early optimism has been clouded by renewed concerns about a looming recession in the America, while the repercussions of the banking crisis appear to be coming back to bite big US lenders,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown
Streeter continued to explain the slowdown in US services could be enough reason for the Federal Reserve to hold off on any more rate hikes in the short-term.
“While signs of further slowing in activity is not great news for the US economy overall, it’s music to the ears of Fed policymakers who are anxious for signs that inflation is responding to monetary tightening,” Streeter said.
“The ISM Services PMI reading, showing a slowdown in growth in May is another nugget of data to add to the growing weight of evidence that interest rate rises are having the desired effect, and bets are rising that the Fed will press pause next week. But it’s going to keep its powder dry and another rate hike could still come this summer.”
FTSE 100 movers
Shell was the FTSE 100’s top faller at the time of writing despite Deutsche Bank adding the oil major to their ‘catalyst call buy idea’ list with a 2,907p price target.
Shell was down 2.5% while BP gave up 1.8%.
Ocado and abrdn shares were higher after the companies avoided demotion to the FTSE 250. This week, it was confirmed British Land would drop down to the mid-cap index to be replaced by IMI plc.