FTSE 100 Climbs Despite Oil Price Drop and Economic Pressures

The FTSE 100 Index experienced a modest increase on Monday, closing up 15.01 points or 0.2% at 9,299.84. This rise followed a robust start to the trading week, bolstered by gains in mining stocks, even as significant oil companies faced declines due to falling oil prices. Earlier in the day, the index reached a high of 9,354.61, nearing its all-time intra-day record of 9,357.51.

The FTSE 250 also performed well, gaining 185.00 points, or 0.9%, to finish at 21,866.48. The AIM All-Share rose by 2.65 points, closing at 780.18. The positive market sentiment was influenced by remarks from Chancellor Rachel Reeves during the Labour Party conference, where she emphasized the importance of fiscal restraint amid international economic challenges.

In her address, Chancellor Reeves committed to maintaining control of public finances, stating, “I will not take risks with the trust placed in us by the British people.” She acknowledged the difficulties posed by global headwinds and the “long-term damage” inflicted on the UK economy. According to Reeves, sustaining commitments to economic stability is vital for ensuring that the government can finance its activities through public debt.

Kathleen Brooks, research director at XTB, noted that Reeves’s speech seemed to reassure the markets while reinforcing her message of fiscal stability. Brooks remarked that this could alleviate some concerns within the bond market if Reeves can deliver a credible budget in the upcoming fiscal discussions. On Monday, the yield on the UK 10-year bond narrowed to 4.70%, down from 4.75% on Friday.

Economic data released by the Bank of England revealed that UK mortgage approvals remained steady, with a total of 64,680 approvals recorded in August, slightly down from 65,161 in July but above the consensus estimate of 64,500. The average interest rate on newly drawn mortgages fell for the sixth consecutive month to 4.26% in August, down from 4.28% in July.

Currency markets showed the British pound trading higher at 1.3432 dollars, compared to 1.3399 on Friday. The euro also appreciated, reaching 1.1731 dollars, while the dollar decreased against the Japanese yen, trading at 148.57 yen. In the United States, the yield on the 10-year Treasury was quoted at 4.14%, a slight decrease from 4.18% on Friday.

In broader European markets, the CAC 40 in Paris recorded a gain of 0.3%, while the DAX 40 in Frankfurt remained largely unchanged. In New York, stock performance was mixed at the close of the London market, with the Dow Jones Industrial Average down 0.1%, the S&P 500 up 0.3%, and the Nasdaq Composite rising 0.6%.

The tech sector in the US showed resilience as investors appeared to downplay concerns about a potential government shutdown. Morgan Stanley estimated that a shutdown could reduce US GDP by 10 basis points for each week it persists, with the risk of deferred government contract payments increasing economic impacts.

On the FTSE 100, notable movements included a 2.3% increase in shares of GSK following the announcement that chief commercial officer Luke Miels will take over as chief executive from Emma Walmsley, who will step down at the beginning of next year. GSK stated that Walmsley believes now is the “right moment for new leadership.”

Pharmaceutical giant AstraZeneca saw its shares rise by 0.9% after revealing plans to upgrade its US listing while retaining its London trading and UK headquarters. This decision aims to harmonize its share listing structure but ensures that the company remains tax-resident in the UK, preserving its FTSE 100 status.

Insurance firm Admiral surged by 3.6% following an upgrade from Jefferies, which moved its rating from “hold” to “buy.” Jefferies highlighted that Admiral’s market sentiment is significantly detached from its fundamental performance, indicating a positive trajectory for the company’s earnings.

Mining stocks continued to attract investor interest, with Antofagasta rising 5.3%, Glencore up 1.7%, and Anglo American increasing by 2.2%. In contrast, the drop in oil prices impacted major oil companies, with BP down 2.5% and Shell down 1.4%. The price of Brent crude oil fell to 67.81 dollars per barrel from 70.64 dollars late last week.

Gold prices continued to soar, reaching a record 3,828.66 dollars per ounce, up from 3,775.97 dollars on Friday. On the FTSE 250, Ocado shares fell 4.1% after its key US partner Kroger expanded its relationship with delivery service DoorDash, causing concerns about Ocado’s market position.

Major gainers on the FTSE 100 included Antofagasta, up 141 pence to 2,807 pence, and JD Sports, which rose 4.02 pence to 93.02 pence. The largest decliners were Coca-Cola HBC, down 138 pence to 3,480 pence, and BP, which fell 10.9 pence to 434.6 pence.

Looking ahead, Tuesday’s global economic calendar includes UK GDP figures, inflation data from Germany, France, and Italy, and key US economic indicators such as the Chicago PMI and house price data. The corporate calendar also features full-year results from merchant bank Close Brothers and half-year results from retailer Card Factory and AG Barr, known for its Irn-Bru beverage.

Contributed by Alliance News.