Bullish sentiment lifts markets despite oil plunge

After lurking around $45 per barrel, Brent Crude has managed to climb back to $46 as comments from the UAE oil minister further confirmed that OPEC (read, Saudi Arabia and the UAE) have no interest in cutting production to aid the commodity the organisation revolves around.

Yet despite oil’s consistent poor performance, and a decline that has only worsened in the past two days, like a break-up that took one party a lot longer to get over than the other the markets seem to finally be ignoring the state of oil to focus elsewhere.

A great barometer for the markets ignoring oil, or at least finding positives in oil, is the FTSE. In the run up to Christmas the UK index was constantly hampered (to put it mildly) by the decline in the black stuff, as investors scrabbled about trying to find a floor for the commodity. However, analysts appear to have given up on predicting when the fall will end, and with this has come a freedom that has allowed investors to price in the effects of the commodity, and the issues it has caused in the energy sector.

Nowhere has this been felt more than on the FTSE, which continued to make gains today on the back of relatively good news from Morrisons, ASOS, Greggs and Tesco. Even the slip in inflation has been spun by those up high to signal the effectiveness of a Conservative economic plan to help customers, one that presumably had the clairvoyance to predict the rapid decline in oil that has stumped analysts elsewhere. On paper the state of oil and the worst inflation figure for 14 years should have caused the FTSE to struggle; instead it has only grown as the day went on.

The Eurozone also managed to make gains this afternoon, again despite all the odds. The potential for Italian political instability caused wobbles this morning, and tomorrow may see the European Court of Justice leave Draghi with significantly narrowed QE prospects. Yet the Eurozone indices are up as much as 2% today as the likelihood of quantitative easing, in a reduced form or otherwise, excited investors. However, as has been seen recently, such growth by the Eurozone has often been met by a fall as Draghi and co. fail to meet the weighty expectations that have only grown since the New Year.

Finally, with a quiet day of news, the US markets took their signal from overseas, dismissing yesterday’s mini-slump to open strong this Tuesday afternoon. Bullish sentiment entered the markets against the grain of economic news, and has led to a consistently positive performance by the major indices, even if the euro and pound continue to falter in the face of the dollar.