FTSE 100 Live May 04: US interest rates set to rise, oil price rises on EU sanctions, new boss at Aston Martin
Oil price up 2.5%, Admiral and Direct Line shares slip
Brent crude futures are up 2.5% at $107.66 a barrel as traders react to European moves to ban Russian oil over the next six months and refined fuels by the end of 2022.
The latest sanctions proposed this morning by European Commission President Ursula von der Leyen have added to broader industry supply concerns after figures yesterday showed a surprise reduction in US stocks.
BP and Shell shares rose 0.5% after Brent rose but the FTSE 100 index weakened 22.64 points to 7538.69 in lackluster trading ahead of the US Federal Reserve announcement this evening.
Gambling business Flutter Entertainment was the biggest riser, rising 4% or 360p to 8,650p as owner Paddy Power reported a strong first three months of the year for its US business FanDuel. Shares of rival Entain were raised by 43p to 1535p.
Car insurer Admiral was at the top of the fallers’ board after rival Direct Line Insurance said its car insurance premiums rose by single digits in early January and remained flat during the rest of the quarter.
He added: “As a whole market, we don’t think this adequately covers the level of claims inflation seen over the last 18 months.”
Direct Line shares fell 7% or 17.5p to 238p in the FTSE 250 and Admiral fell 5% or 118p to 2443p.
The FTSE 250 index lost 93.54 points to 20,427.22, although Aston Martin Lagonda shares rose 3% or 26.8p to 872.4p after its first quarter results and change of director general.
New boss at Aston Martin, first quarter loss jumps
Aston Martin Lagonda chief executive Tobias Moers is leaving with immediate effect, to be replaced by former Ferrari boss Amedeo Felisa.
Canadian billionaire Lawrence Stroll, who is the executive chairman and one of the company’s major shareholders, said: “Now the company needs to enter a new phase of growth with a new management team and a new structure to ensure we achieve our goals.”
He said Felisa, who is already a non-executive director at Aston Martin, had an “excellent track record” and previous experience leading a major manufacturer of ultra-luxury cars. Stroll added: “His technical acumen and charisma will be an inspiration to the entire company.”
Moers’ replacement after two years in the role came as Aston Martin was locked into 2022 guidance despite a sharp rise in its first quarter operating loss to £47.7million.
More major US rate hikes to come
Today’s rate hike will be the first time the Federal Reserve has raised in back-to-back meetings since 2006.
Deutsche Bank sees Chairman Jerome Powell telling market prices that further half-point rate hikes are coming.
The bank’s U.S. economists believe it will be the first of three consecutive half-percentage-point moves that will eventually take federal funds rates to a high of 3.6% in mid-2023. .
They also expect balance sheet reduction to begin in June, with a cap of $60 billion a month for Treasuries and $35 billion for mortgage-backed securities.
Deutsche Bank commentator Jim Reid added today: “While the Fed may have already started its hike cycle seven weeks ago, the feeling that it is behind the curve does not has only grown over this period.”
Focus on the Fed rate decision, Wall Street stable
Stock markets are trading sideways ahead of tonight’s Federal Reserve decision, when policymakers are expected to raise interest rates by half a percentage point.
Although this is the biggest rise in more than two decades, investors will be primarily focused on the Fed’s guidance on the path of interest rate hikes for the rest of the year.
Wall Street is banking on a year-end level near 2.5% as another half-point hike is expected at the next Fed rally before further hikes at subsequent meetings as policymakers politicians are struggling to bring inflation under control.
Tight labor market conditions, which risk inducing a wage and price spiral and more persistent inflation, continue to be a concern after yesterday’s figures showed that the number of job vacancies for United States rose more than expected by 205,000 to reach a new high.
Oil-related inflationary pressures also remain after Brent futures rose 1% to $106 a barrel on supply issues created by a surprise drop in U.S. inventories. The prospect of new EU sanctions targeting the Russian oil industry has added to the pressure.
The Federal Reserve’s decision is at 7 p.m., followed by a press conference with Chairman Jerome Powell 30 minutes later.
Until then, investors seem content to sit on the sidelines after Wall Street indices traded moderately higher on Tuesday and are forecast for a flat session today. It’s a similar story in Europe, with the FTSE 100 index set to open unchanged at 7561.