After being closed on Monday for Independence Day, US markets closed the trading day strongly yesterday, and key markets opened with a flourish today.
In the UK, the government was plagued with resignations from key members of cabinet overnight – Rishi Sunak, the Chancellor of the Exchequer; and Sajid Javid, the Health Secretary. Whilst the nation watches on to see what will happen next, the spat has had little to no impact on markets, as we are now in the morning of the next trading day with the FTSE up 1.57% (at the time of writing).
Russia’s oil production was up 7% for June, and the May reading for industrial production (1.7%) shows growth. The oil production increase in Russia is thought to be largely due to domestic demand and export buyers in Asia. This shows that Russia has the ability to extract oil, and now that an energy reallocation is starting to play out, this will contribute to any downward pressure on energy prices.
Earlier in the week, markets retreated as fears of a technical recession in the US loomed (defined as two consecutive quarters of negative growth in real GDP). Once markets had time to process this, the thought process broadly changed from one of being concerned about growth, to one of realisation that central banks will raise interest rates at a slow, steady rate to avoid a policy-driven recession, and also that many of the pressures behind inflation are due to self-moderate and a realisation that concerns over growth in the short-term will help to ease inflation. As we have said previously, central banks react to prevailing market conditions, and will raise rates at a slow and steady pace, remaining data dependent along the way.
Given this epiphany for markets, after opening in negative territory, the US ended the day strongly, and many key markets opened this morning with a bounce!
Hannah Owen, Portfolio Specialist