Financial Market Comments from Tim Hughes, Head of Sales Trading, IG Index.
During morning trading in London, the FTSE has so far failed to bounce back from yesterday’s 2% drop.
Oil majors are weighing heavily on the index for the second day running. Shell, the largest oil company in Europe by market value, announced 5000 job cuts after releasing a 73% reduction in year-on-year profit over the three months to September.
The company’s share price was down 3.64% by 10am in London as it said it was not expecting a swift recovery.
On the other side of the FTSE, banks are showing a little more resilience; RBS and Lloyds were up 6.84% and 4.49% respectively. Miners are also largely on the right side of the index today.
Over the past weeks – and specifically the past few days – there has been a sea change in investor mood. Throughout the rally that saw the UK’s leading index break 5000 points, there was talk of equities being overbought given the uncertain economic backdrop.
This possibility now seems to have been brought home by a number of worse-than-expected pieces of data, both from the US and in the UK. Today’s losses for oil majors are a case in point; without a fundamental and worldwide demand for crude, investors feel that oil business equities are looking overbought at current levels.
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