FTSE 100 supported by miners, BP hits six-month high

The FTSE 100’s weighting towards commodities helped provide support on Tuesday as stronger miners and oil majors offset weakness in BAE Systems and Rolls Royce.

London’s leading index was 0.15% higher as investors awaited major economic developments later in the week including US CPI due to be released tomorrow and the ECB’s interest rate decision on Thursday.

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Both will contribute to shaping the narrative around interest rates and influencing the expectation of when major central banks will cut rates. With equity markets enjoying support and trading near record highs, investors will be on tenterhooks as the numbers are released.

“Forecasts imply the ECB will hold rates at 4.5% yet last week’s stronger than expected US jobs data and the ongoing strength in the oil price have raised expectations that the Federal Reserve will push back rate cuts until later in the year, and this has subsequently spooked investors into thinking other central banks including the ECB will also sit on their hands for now,” said Russ Mould, investment director at AJ Bell.

“Tomorrow’s CPI inflation figure in the US also threatens to intensify the argument that rate cuts will not be imminent. The consensus forecast is for a 3.4% year-on-year inflation rate in March, up from 3.2% in February and 3.1% in January. Inflation slowly creeping higher goes against what the Fed wants to see to justify rate cuts.”

Miners rally

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On another day of minor gains for the FTSE 100, mining companies were again among the top risers as the inflation trade supported commodities and sent extraction stocks higher. Fresnillo, up 4.4%, was again the top riser as the precious metals miners enjoyed elevated gold and silver prices.

Ocado was another standout performer, with a 3% gain as bargain hunters stepped into the beaten-down premium grocery and food retailing company.

BP and Shell helped support the wider index with 1.3% and 0.8% respective gains amid higher oil prices. BP also garnered the interest of investors after saying Q1 24 upstream activities – those concerned with extraction – would be ahead of Q4 23.

“Shares in BP hit their highest level in six months after it said first quarter upstream production would be higher than the previous three months,” Russ Mould said.

“Sentiment has also been helped by Brent Crude holding firm above $90 a barrel which creates a positive earnings backdrop for the oil industry.

“It’s impossible to judge a company purely based on three months’ performance but full year guidance implies BP is hoping to quietly get on and do the job, achieving small incremental gains which should be enough to keep the market happy.”

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