Oil and defence companies are pushing up markets in Europe this morning with London and Paris in the green, while Frankfurt struggles. The FTSE 100 is up 0.15 per cent with the Cac rising 0.3 per cent. After we noted the unusual dip in the oil price yesterday morning, Brent has gone the other way as tensions rose throughout the day yesterday, and Iran launched missiles at Israel, who said it would retaliate. Brent is up 1.7 per cent in early trading with the price of US government bonds and gold also rising, the latter is only $15, or 0.59 per cent, off its all-time high of $2,668. Fears of a full-scale war between Israel and Iran, which would likely engulf the rest of the Middle East, are back at fever pitch.
Shell, BP and BAE Systems lead the FTSE 100 risers tables this morning in what was a very easy trade, with analysts expecting disruption to oil supply. The last time Israel invaded Lebanon in 2006, the oil price spiked 30 per cent but supply this time should be easier to control with Opec countries sitting on a bigger surplus, according to the Financial Times. Rising tensions didn’t boost US markets yesterday, which ended the day down: the S&P 500 by 0.9 per cent and the Nasdaq Composite falling 1.5 per cent, however, defence and oil stocks were the exception to what was an otherwise fairly broad fall.
One market shrugging off any fears is Hong Kong which continues to rally following last week’s stimulus plan from the Chinese central bank. The Shanghai market remains closed for a week-long public holiday, leaving Hong Kong to reap the rewards. The Hang Seng rose another 7 per cent overnight, its best day in nearly two years. The tensions also meant less attention was paid to the US job openings figures, which were meant to help traders figure out where the Federal Reserve goes next. The number of job openings unexpectedly rose in August, potentially suggesting the Federal Reserve acted too quickly in cutting rates by 0.5 percentage points. However, while job openings rose, the ‘quit rate’ fell, meaning workers are less confident about leaving their roles, suggesting weakening sentiment. A mixed bag all in all. Traders will be back on Friday looking at the non-farms, although there’s of course plenty to overshadow this.
By Neil Wilson, chief market analyst at Finalto