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Potential spike high in oil markets sees more market volatility

There was some dramatic action in the crude oil markets yesterday as prices popped up to a new high close to $140 only to fall back and end slightly lower on the day. Whether or not this is a short term high for oil remains to be seen, but the volatility looks set to continue to affect equity markets.

So far this morning we have seen a 50 point rise on the FTSE 100 index as the three day recovery continues after last week’s selloff. The rises have been rather more spread within various sectors rather than purely driven by recovery stocks as has been seen in recent sessions, and there is still an element of uncertainty as to where we go next.

This morning’s inflation data has shown UK CPI at an annualised rate of 3.3%, again slightly above forecasts, so this will require a letter from the Chancellor to the Bank of England indicating why the figure is above the bank’s target. It will also put pressure on the BoE’s Monetary Policy Committee to consider interest rate rises despite the fragility of the economy.

On a quieter day for reports, Whitbread provided an element of reassurance as it reported a strong start to the current year with growth in all of its businesses. Total sales in the 13 weeks to 29th May were up by 14.6% and like-for-like sales grew by 7.1%. Sales growth was impressive at Premier Inns, at the pub restaurant arm and at Costa Coffee, and the shares were up 4% mid-morning. They still remain within a trading range so again we would prefer not to chase this until we see what effect the consumer downturn has on future sales growth.


Head of Research at Blue Index, specialists in trading Contracts For Difference
17/06/2008

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