Crude oil drop weighs on FTSE100

The start of the week was lackluster for European markets, after a session in Asia dominated by fears that Chinese authorities would be forced to introduce new containment measures, after the country reported its first Covid-related deaths. since April.

Europe

Consequently, we have seen sharp declines in the price of crude oil and base metals on concerns over weaker demand, which has weighed on basic resources and the energy sector. The drop in crude oil was not helped by a report that Saudi Arabia could support an increase in supply.

This has seen companies like BP, Shell and Harbor Energy slide to the bottom of the FTSE100.

Also, under pressure Compass Group the share price fell despite the release of an impressive set of annual results. Revenue reached £25.8 billion, up 37.5%, increasing operating profit on an underlying basis by 87.5% to £1.59 billion. Operating margins also rose, as the company raised its 2023 outlook for organic revenue growth to 15%, above expectations of 12%. Despite this outperformance, shares fell after the company added another £250m to its buyback programme. This was below expectations of a much higher number. There’s just no fun for some people!

On the positive side Endeavor Mining is higher after reporting a major gold discovery in Ivory Coast. The discovery has the potential to be the largest discovery in the last ten years, with a low discovery cost of less than $10 for each ounce of gold discovered with a recovery rate of at least 95%.

We also saw the more defensive parts of the market doing well, such as GSK and AstraZeneca, helping to support the FTSE100

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US markets opened lower in what is expected to be a short week due to the upcoming Thanksgiving break on Thursday, while soaring covid rates in China weighed on the broader economic outlook.

disney shares are in focus after former CEO Bob Iger was reappointed CEO, replacing Bob Chapek, whose tenure has seen the share price fall sharply over the past 12 months as striving to make a profit from his streaming business. The timing is curious given that in June the board voted to extend Chapek’s contract for three years.

It would appear that recent third-quarter earnings numbers have prompted a reassessment from board members, disappointed by continued losses in the streaming side of the business. The decision seems a little harsh given the challenges the company has faced following the Covid shutdowns, as well as the rising cost of living that is squeezing margins.

Effects

The US Dollar has started the week well, as the follow-up to comments from St. Louis Fed Chairman James Bullard from last week continues to filter in, and ahead of the release of this week’s Fed minutes. Much of today’s strength appears to be more related to the slight sentiment risk seen today due to concerns that the Chinese government will reimpose strict lockdowns in response to rising covid infections and the first Covid deaths since the start of the second quarter when Shanghai emerged from lockdown. This is not better confirmed by the fact that the largest gains are against stocks like the Japanese Yen, which hit highs last week.

Goods

crude oil prices fell sharply on concerns over weaker Chinese demand, as well as reports that Saudi Arabia is backing the idea of ​​increased production, sending Brent prices to record lows since January, and well below the levels they were before the Russian invasion of Ukraine. From a consumer perspective, this is good news as Christmas approaches, as it will likely lead to lower prices at the gas pump.

Copper Prices also continued to slide after hitting four-month highs last week as Chinese demand concerns weigh on the outlook. The rebound in the US dollar is also weighing on prices.

Volatility

Sugar prices saw volatile trading last week amid supply issues and Friday was no exception, with the US contract trading in a range of around 4%. One-day volatility rose to 39.69% from 30.11% over the month.

Sticking with commodities, crude oil also slipped on Friday, testing levels not seen since late September. Again, it was a case of weaker demand from China that fueled sentiment here, driving prices down by as much as 10% over the week. The potential for an OPEC response cannot be overlooked here, which could keep the asset active in the days ahead. One-day theft on the WTI Crude was at 41.97% versus 40.18% on the month.

CMC’s proprietary basket of Chinese Tech stocks also struggled ahead of the weekend break, with the rally of the past few weeks finally running out of steam. A slowdown in consumer spending in China was seen as a key factor here and led to Alibaba receiving price target cuts following the earnings news. One-day theft on the basket advanced to 88.13% from 82.13% on the month.

Price action among cryptos continues to fall sharply, with Bitcoin’s one-day print of just 29.98% versus 65.55% for the month, with this pattern repeating across other digital assets as well.

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