MARKET WRAP: FTSE higher, oil rally continues, Bitcoin breaks $50K

imageEconomy6 hours ago (Oct 05, 2021 16:33)

© Reuters.

Key Points

  • FTSE 100 closing price of 7,077.33, +1.0%
  • Financials rally as yields rise
  • Shell and BP jump on oil price rise
  • GBP strong on improving risk sentiment, PMI beat
  • Bitcoin trades back above $50,000

By Samuel Indyk – The FTSE 100 posted gains of 1% on Tuesday as a rally in financials and energy companies lifted the index.

Lloyds (LON:LLOY), Barclays (LON:BARC), HSBC (LON:HSBA), and NatWest (LON:NWG) were all trading near the top of the blue-chip index as the rising yield environment should benefit banks whose margins have been squeezed by lower yields. The UK 10-Year yield touched its highest level since May 2019 as surging energy costs look like they could begin to impact inflation and ultimately force the Bank of England to reduce stimulus sooner rather than later.

Royal Dutch Shell (LON:RDSa) and BP (LON:BP) also traded higher as oil prices continued to extend on the multi-year highs hit during yesterday’s session. Brent crude briefly touched $83/barrel with WTI trading above $79/barrel after the decision to maintain planned output increases. Again, surging Natural Gas prices could see demand for oil increase as companies switch to cheaper fuels.

“Analysts are now eyeing $85 as the next hurdle for Brent with a break above this resistance pointing to the potential for a move towards $90,” said Victoria Scholar, Head of Investment at interactive investor. “Brent crude has rallied around 60% year-to-date, contributing to the broader surge in commodity prices, which has seen the Bloomberg Commodity Spot Index top its 2011 peak this week and log an all-time high.”

The USD was strong as the United States 10-Year yield breached 1.5% again but focus will likely stay on Nonfarm Payrolls for now.

GBP was also strong with EUR/GBP dropping to a 3-week low as the pound continues to recover from last week’s sell-off.

“In view of the significant discrepancy between ECB and BoE comments, one should expect sterling to be stronger,” said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank (DE:CBKG).

The final reading of the IHS Markit Services PMI was revised higher with September data indicating another strong recovery in service sector activity, although new orders expanded at their slowest pace since the winter lockdown.

“The supply chain crisis put a considerable brake on recovery in the UK service sector during September,” stated IHS Markit Economics Director Tim Moore. “Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities.”

Finally, Bitcoin maintained its recent strength as the cryptocurrency broke above $50,000 for the first time since 7th September, the day of El Salvador’s rollout of Bitcoin as legal tender.

“Recapturing the $50,000 level is a big deal for Bitcoin and significant for the cryptoverse,” writes OANDA Senior Market Analyst Edward Moya. “If Bitcoin rallies above the $52,000 level, that could trigger another wave of technical buying.”


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MARKET WRAP: FTSE higher, oil rally continues, Bitcoin breaks $50K

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