Despite a little dip towards the end of the day caused by a lower open in the US the FTSE made solid gains Thursday, as did most European indices. One of the major drivers was higher oil and commodity prices; three out of the top five FTSE risers were mining companies, and oil producers were not far behind.
In contrast, with the arrest of Huawei’s CFO still fresh in investors’ minds Wall Street tech stocks came under pressure for fears that a further frosting of trade relationships between the US and China will negatively affect demand.
On the sellers’ hit list were chip makers and fibre-optic companies in particular, because of their heavy reliance on Chinese buyers, but the tech sector as a whole suffered on fears of some form of retaliation for the Huawei (SZ:002502) arrest.
US jobless at historic low
Apart from the China trade factor the US markets have been more nervous than usual over the last few sessions as investors are getting increasingly concerned that the long-term bull run in the stock markets may be nearing its end.
During the week the yields in the bond markets inverted – that is, some of the yields on longer term papers declined below the shorter term yields, a reversal of a normal situation and a signal that has in the past preceded economic downturns.
On the surface though, data coming out of the US still points to solid domestic growth. The latest jobless numbers show that job creation continues apace, albeit at a slightly slower pace than some economists have expected, while jobless claims remain at a low not seen since 1969.
The dollar traded mixed on the day, weaker against the euro but stronger against the pound, concluding a week which has seen the currency give up significant ground. The main worry for traders is that the Fed will readjust its rate hike programme planned for December and early next year in anticipation of slower growth, which would weaken the greenback still further.
Oil price jumps on production cut deal
The closely watched OPEC meeting in Vienna which was expanded to include Russia and 9 other non-OPEC countries has finally concluded a plan to cut production by a solid 1.2 million barrels a day, not far off 1% of the global oil production.
Saudi Arabia initially advocated for a lower rate, but the actual figure producers eventually agreed on was much closer to what oil investors had hoped for. Of that, OPEC will reduce output by 800,000 barrels a day while the rest will be scaled back by Russia.
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