Oil surged and the pound dropped this week, amid a more lacklustre five days for equity markets, with energy investors pushing the commodity back into bull market territory following the release of positive data.
Having dipped as low as $41.51 a barrel in the first week of August, Brent crude has rebounded sharply to move back above $50. Concerns about a possible output freeze and a shock drop in US supply data combined to push it to $50.58 as London closed on Friday.
Meanwhile the pound succumbed to some heavy selling on Friday, following reports that Brexit could be implemented as soon as Spring 2017. Having made some headway throughout the week to move above $1.31 versus the US dollar, it pulled back to $1.3059 on Friday following a report that new Prime Minister Theresa May may push through the UK’s exit from Europe earlier than expected.
Away from volatile commodity and currency markets, equities around the globe were more subdued, with investors keeping one eye on Fed chair Janet Yellen’s Jackson Hole speech next week.
As a result, the FTSE 100 dipped on the week, closing down at 6,859 points, while the FTSE 250 followed suit, ending the week at 17,874 points.
At a stock level, losers for the week included the pharmas (GlaxoSmithKline and AstraZeneca both edged down more than 1%) and the banks.
Rather than the start of a major correction, this week’s performance is being seen as one caused by traders holding fire for a better entry point after very healthy gains in recent weeks, in particular for internationally-focused firms.
What comes next? In an update this week, a Man GLG portfolio manager explained there could be more gains to come for equities given the bullish mood of company executives: “There is a marked incongruity between the melancholic naval-gazing of those still stuck in the post-Brexit second stage of grief, and the business-as-usual sentiment emanating from many senior executives of major UK corporations.
“At 18x the UK market is not overly expensive relative to other developed markets while estimates momentum is positive. In short we could see the UK rising higher still as many participants still in the panic stations calm down and re-join the fray.”
Meanwhile overseas, US markets mimicked the UK, with the S&P 500 flat on the week, trading at 2,183 points shortly after London closed, while the German Dax pulled back from 10,713 points last Friday to close at 10,544 points.
In Japan, where markets remain far below record peaks, there was also more selling, the index sliding from 16,915 points to 16,545 points.
In the wake of the crisis, and in order to provide a quick and easy snapshot of the real impact of Brexit on markets, we will be updating the Brexitometer weekly, detailing the impact of the EU referendum result on UK markets.
FTSE 100: UP 8.2%
6,338 points at close on 23 June.
6,859 points at close on 19 August.
FTSE 250: UP 3.1%
17,334 points at close on 23 June.
17,874 points at close on 19 August.
FTSE All Share: UP 7.3%
3,481 points at close on 23 June.
3,736 points at close on 19 August.