The Cheltenham horse racing festival may not have been overly kind to the ‘bookies’ but it heralded a much-needed change of sentiment in global stock markets.
Appetite for risk came back as oil prices moved back from their recent intra-day high of $137 per barrel to a little over $100 which was because of hopeful news on peace talks between Russia and Ukraine.
Liz Truss, the UK Foreign Secretary was not impressed and said that this is a typical song out of the Russian playbook and was a diversion while further acts of atrocity took place – let us all hope she is wrong.
Even the expected 0.25% rate rises from both the Bank of England and US Federal Reserve did little to damage the positive mood.
The Fed signalled six additional moves this year with the average expectation of all Committee members showing a Fed Funds rate of 1.9% (current level at 0.75%) at the year end.
The UK is likely to be similar in their own moves on interest rates so mortgage holders on variable or base-rate trackers will potentially need to budget higher expenditure.
Rishi Sunak is preparing to deliver his ‘mini budget’ or spring statement today.
Although, the Treasury is around £40 billion healthier than the Office for Budget Responsibility thought, due to higher tax receipts amid increased growth, all eyes will be on whether the Chancellor decides to change his plans to raise national insurance contributions or even reduce other taxes such as fuel duty in order to compensate for the worst cost of living crisis in a generation.
His words in the House of Commons will be scrutinised and could significantly move the UK stock market.
The US technology dominated Nasdaq index led the way across markets helped by a conciliatory tone from the Chinese regulator in relation to US quoted Chinese stocks.
The Nasdaq Golden Dragon China Index had fallen by 70% from its 2021 peak – a level not seen since 2013. Stocks such as Alibaba, and JD. Com recovered over a third higher but are still only where they were just two weeks ago.
It may seem churlish to keep talking about energy prices but last year they represented around 6.5% of World Gross Domestic Product and forecasts from respected consultants suggest that in 2022 it will double to 13%.
We are all going to have to accept that petrol and energy will make a bigger dent in our pockets, not to mention the general cost of living increases including rampant food inflation.
Finally, two other pieces of news which highlights the predicament we all face today. Saudi Arabia’s state oil company, Aramco increased their projected capital investment programme by around 50% this year – last year their programme cost $31 billion.
The International Energy Agency (IEA) is warning that Russian oil production could plunge 3 million barrels a day in April to just 8.6 million barrels and could cause another price surge.
Oil prices tend to peak in the middle of each year in July/August. Unpalatable actions such as more working from home, lower speed limits and car free Sundays in cities need adopting as emergency measures – hmmm, not sure there will be too many takers!
