UK markets are poised for a lift as investors brace for a packed day of central bank announcements, with the Bank of England (BoE) taking centre stage.
According to Matt Britzman, senior equity analyst at Hargreaves Lansdown, the FTSE 100 is expected to open slightly higher, though European sentiment remains “jumpy” ahead of the decisions.
Bank of England expected to cut rates
The BoE is widely anticipated to cut interest rates by a quarter of a percentage point to 3.75 per cent. Britzman notes that this move is supported by “cooling inflation and a softer economy”. However, a unanimous decision is unlikely, with some Monetary Policy Committee members expected to adopt a more cautious stance, suggesting that further rate reductions in the new year will be “slow and cautious”.
Across the Atlantic, US markets have been volatile, experiencing a “seesaw” effect driven by shifting narratives in the artificial intelligence sector. The S&P 500 recently slid for a fourth consecutive day, dragged down by profit-taking in big tech and chipmakers.
Oracle has come under scrutiny regarding its spending commitments, which Britzman describes as becoming a “stress-test stock for the whole AI spending boom”. However, he distinguishes Oracle from its cloud peers, noting it lacks the “blank cheque” balance sheet of more established competitors.
Despite the recent dip, US futures point to a brighter start, bolstered by strong quarterly results from chipmaker Micron, which offered a “timely antidote” to fears of an AI spending bubble. All eyes now turn to the upcoming inflation reading to set the market’s direction.
Oil rebounds from lows
In commodities, Brent oil has climbed back above $60 a barrel, recovering from near five-year lows. The rebound is attributed to rising geopolitical tensions, including US sanctions tightening on Venezuelan oil and potential tougher actions against Russia. A fall in US stockpiles also supported prices, despite an increase in petrol and diesel supplies.
BP appoints Meg O’Neill as CEO
In major corporate news, BP has appointed Meg O’Neill as its new CEO, marking the first time an external candidate—and a woman—has led the oil major. An industry veteran with 23 years at ExxonMobil and a tenure as CEO of Australia’s Woodside Energy, O’Neill is tasked with steering the company through a turbulent period.
Derren Nathan, head of equity research at Hargreaves Lansdown, highlighted the challenges ahead: “With the sector facing pressure, consolidation is the talk of the town, but BP is most frequently seen as prey rather than the hunter… O’Neill may have a fight on her hands to ensure BP’s not sold for a song, and to keep a seat at the table if it were to join forces with a competitor”.
The appointment follows the departure of former CEO Murray Auchincloss and chairman Helge Lund earlier this year, completing a “legacy clear-out” amidst pressure from activist investor Elliott Investment Management. Investors will now look to O’Neill for a plan to shore up the balance sheet and define BP’s role in the energy transition.