FTSE rebounds and Oil producers come to agreement

February 22, 2016

The strong rebound in equities continued through last week, with the FTSE 100 rising from Monday through to Thursday. While some concerns remain over the health of the global financial system, the significant falls seen in many shares became too much of a draw for bargain hunters able to look through short-term market sentiment. The FTSE 100 has now recovered much of the ground lost since the start of the year although the winners and losers in the market have become increasingly fragmented.

oil & gas

There were the first signs of a formal agreement between oil producing countries last week. Saudi Arabia and Russia (the two largest oil-producing countries in the world) met last Tuesday to agree on a production freeze, meaning that they would not increase production from its current level. This was swiftly followed by Qatar and Venezuela agreeing to the same. While the deal sounds positive, given the countries are already pumping at what appears to be full capacity, there will be little tangible change. Furthermore, if the agreement were able to give support to the oil price, participants would be highly incentivised to renege on the deal capturing market share as well as benefitting from a higher oil price. However, the hope is that this is the first step in gaining a more meaningful agreement which reduces supply. Given the global oil market is only oversupplied by 3-4%, if major producers were able to agree it would not take a great deal to rebalance the market.


Domestically, the EU referendum continues to be big news. The date of the referendum has been set as 23rd June. So far the impact has been limited to the currency market, with speculators selling the pound. At this stage, it is difficult to estimate the probability of an out vote as well as the impact of such a call on domestically listed companies and the economy. However, this ambiguity is likely to add to increasing market volatility if the result is not clear cut.


Index Open Close Change % Change
FTSE 100 5707 5950 243 4.3%
S&P 500 1864 1917 53 2.8%
Dax 8967 9388 421 4.7%
Cac 40 3995 4223 228 5.7%
Nikkei 225 14952 15967 1015 6.8%
UK 10 Year Gilt Yield 1.43 1.439 0.009 0.6%

German and French GDP figures are released this week as well as inflation data from Japan. US consumer confidence is due out on Tuesday.

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