Spreadex Market Update
(Relative) Chinese stability leads to calming of commodities and slightly green picture ahead of UK Q2 GDP
Crucially, however, the index managed to avoid sliding to the same kind of 8-year one-day record losses from Monday. This allowed commodity prices to calm, if in no way recover, with Brent Crude remaining the weakest in the sector.
The reason behind that oil weakness can perhaps be attributed to the dismal second quarter results from BP; a combination of the continued slide in Brent Crude mixed with its hefty fine following the Deepwater Horizon debacle meant that BP’s profit fell from $3.6 billion to $1.3 billion year-on-year, lower than the $1.7 billion forecast. In fact due to the aforementioned oil spill fine, BP actually ended the quarter with a loss of $6.26 billion; however, after a brief wobble, it soon joined the rest of the sector in a mild recovery. Weak figures from an oil giant are hardly a surprise at this point in time, mitigating the losses that could have greeted such a dismal set of results.
Calmer commodities meant the FTSE could tentatively try and begin again its climb into yearly-profit, after the UK index fell lower than its 2015 starting price following yesterday’s commodity sell-off. It could get an extra boost this morning if its preliminary second quarter GDP figures match (or exceed) the 0.7% forecast. That’s an improvement on the 0.4% for the first quarter, a figure that itself was revised upwards from the 0.3% initial estimate back in April.
Plenty of weight will be attached to this Q2 GDP figure, even if it is preliminary: it will provide a litmus test for both the kind of figures likely to come from the Eurozone and US, as well as a test of the market reaction to said figures; closer to home it will either lend credence to Carney’s recent claims that a rate-hike is likely at the end of the year, or will put in doubt the chances of a lift-off, dependent on how accurate the forecasts have been.
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