MARKET WRAP: FTSE edges higher, EUR steady after German Election

imageEconomy9 hours ago (Sep 27, 2021 16:36)

© Reuters.

Key Points

  • FTSE 100 closing price of 7062.74, +0.16%
  • Rolls-Royce surges after contract win, asset disposal
  • Energy names higher as Brent heads towards $80/barrel
  • EUR steady after German election results
  • GBP strong on BoE expectations
  • Cryptocurrencies steady after China crackdown

By Samuel Indyk – The FTSE 100 edged higher on Monday but finished off of best levels as US markets were mixed in early trade.

Rolls-Royce (LON:RR) was the best performing stock in the blue-chip index, surging over 10% after the company announced it had won a contract with the US Air Force to supply engines for the B52 for the next 30 years. The contract could be worth up to up to $2.6 billion. Separately, the jet-engine manufacturer announced it had reached an agreement to sell ITP Aero for approximately €1.7 billion to a consortium led by Bain Capital.

Oil & Gas names were also higher in London as oil prices rose for a fifth consecutive trading session. Brent Oil Futures traded above $79/barrel for the first time since October 2018, while WTI traded above $75/barrel. The rally comes as supply continues to remain tight and the demand recovery continues. Analysts at Goldman Sachs (NYSE:GS) raised their forecast for Brent crude futures by $10 and now expect the benchmark to hit $90/barrel by the end of the year.

Royal Dutch Shell (LON:RDSa) and BP (LON:BP) rose to the top of the FTSE 100 while Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW) traded near the top of the FTSE 250. Petrofac (LON:PFC) surged for a second straight trading session after the company agreed on Friday to settle bribery charges with the UK’s Serious Fraud Office.

The German election resulted in the tiniest of victories for the centre-left SPD but the margin was slight and neither of the two main parties gained enough seats for a majority. The SPD leader Olaf Scholz has said he has a clear mandate to form a government but talks with some of the smaller parties are now expected to drag on as they try to form a workable coalition.

The EUR was relatively unfazed by the election results with EUR/USD holding steady around 1.1700. GBP was one of the better performing currencies with GBP/USD trading above 1.3700 following last week’s Bank of England meeting where they said that the argument for tighter policy had “strengthened”.

In a speech on Monday, the Bank of England Governor Andrew Bailey said that the Monetary Policy Committee believes there will need to be some “modest tightening” to meet the inflation target sustainably over the medium-term. Bailey added that should the Old Lady of Threadneedle Street need to alter monetary policy in response to inflation pressure then that should involve the Bank Rate and not QE.

Cryptocurrencies were relatively steady after China’s firmer crackdown late last week. On Friday, the People’s Bank of China announced a blanket ban on cryptocurrency transactions with exchanges now beginning to cut off Chinese users. Huobi and Binance both announced measures that included stopping Chinese users from signing up and retiring existing mainland China accounts.


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MARKET WRAP: FTSE edges higher, EUR steady after German Election

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