Oil Prices Rise After Drone Attacks, Dollar Up Before Fed

Equities

The FTSE 100 saw an uptick, closing 0.2% higher, buoyed by Unilever's gain of 3.1% on the heels of its announcement to spin off its ice cream division, which includes popular brands like Magnum and Ben & Jerry's, and its decision to cut 7,500 jobs. But generally investors remained cautious, holding back from making substantial moves ahead of the awaited domestic inflation data and the international anticipation for the US Federal Reserve's monetary policy announcement.

Close Brothers Group saw its shares jump 4.0% fuelled by the lender's forecast for sustained underlying loan book growth in the latter half of the year. Conversely, Reckitt faced a downturn, dropping 4.5% after Citigroup reduced its price target for the stock, amidst concerns over a potential £4 billion settlement related to Enfamil baby formula lawsuits. The mid-cap FTSE 250, saw a slight decline, falling 0.3%, dragged down by a 9.1% fall in Crest Nicholson after the homebuilder projected a reduction in the number of homes it plans to construct in fiscal 2024.

Across the pond in the US, Wall Street's major indexes ended the day on a positive note, with the Dow Jones Industrial Average increasing by 0.83%, the S&P 500 by 0.56%, and the Nasdaq Composite by 0.39%.

Nvidia played a pivotal role in this uptick, with its shares recovering from early losses to close up 1% following the announcement of its Blackwell B200 artificial intelligence chip, touted to be 30 times faster than existing chips. Noteworthy gains were also seen in Home Depot, McDonald's, and Apple Inc., contributing to the Dow Jones's outperformance. However, the energy sector led the advances with a 1.1% rise as oil prices increased.

Forex & Commodities

On Tuesday, the yen experienced a significant drop, reaching a four-month low, after the Bank of Japan announced an end to its negative interest rate policy, a decision that was highly anticipated. Despite this shift, aimed at moving away from decades of massive monetary stimulus, the yen weakened against the dollar, falling more than 1% in US trading hours.

The dollar, meanwhile, saw strength ahead of the Federal Reserve's policy outlook, expected to maintain rates at 5.25% to 5.50%. This anticipation keeps the dollar in a strong position, especially with the US economy showing resilience, suggesting inflation remains a deterrent for rapid rate cuts by the Fed.

Gold prices dipped slightly as the dollar gained, making gold more expensive for overseas buyers. This movement comes as investors await the Federal Reserve's interest rate stance, with expectations set for rates to hold steady. The impact of central bank decisions on gold prices is closely watched, with gold recently hitting a record peak but experiencing a dip following US inflation data.

Oil prices also adjusted, with Brent crude and West Texas Intermediate futures both falling as a stronger dollar diminished demand. This occurred despite the previous session's rally to multi-month highs, spurred by Ukrainian drone attacks on Russian refineries.