By Anna Peel. Originally published at ValueWalk.
- Lacklustre start for the FTSE 100 as chill descends over global markets.
- Bitcoin drops below key $20,000 threshold as flight from risky assets continues.
- Brent crude falls to $113 a barrel amid worries about global growth.
- Miners hit by worries about a slowing world economy
- British Airways owner IAG higher despite latest raft of cancellations
FTSE 100’s Lacklustre Start
“With the realisation the comfort blanket of cheap borrowing is being whipped away, investors are experiencing fresh chills at the start of the week. With no rally for beleaguered US indices on Friday, Japan’s Nikkei and Australia’s ASX 200 were around 0.7% lower. The FTSE 100 lifted slightly, but it’s still a pretty lacklustre start to early trade. The index is hovering close to the psychologically important 7,000 mark, a level it has not seen since early March soon after the invasion of Ukraine.
Bitcoin is still being whipped by winds of worry as the investors flee the crypto world in their race away from risky assets. It’s dipped back below the key milestone of $20,000, a price it last hit back in 2020 when the cryptocurrency was on its way up to dizzying heights. This time it’s hurtling down in value and although we’ve seen coins and tokens hit by extreme volatility in the past, the indications are that this decline may not be reversed any time soon and that a crypto winter could be settling in.
Investors sense there is trouble ahead for the world economy, given that the priority of the powerful US Federal Reserve is to stamp out the flames of inflation even if that means extinguishing growth. Although US Treasury Secretary Janet Yellen said yesterday a recession is not at all inevitable, she cautioned that the economy would slow, indicating that the price spiral will take time to reverse, given that inflation’s causes were global.
Expectations of lower demand for oil as economies slow has pushed the oil price down, with Brent Crude trading at $113 dollars a barrel. But that’s unlikely to translate to much respite at the fuel pumps with crude still more than 40% higher than six months ago and supply concerns still a worry, given the entrenched war in Ukraine. Uncertainty about the global outlook is also weighing on miners and commodity firms with Rio Tinto, Anglo American, Antofagasta and Glencore among the fallers in early trade on the FTSE 100.
There are some indications investors searching for bargains are scooping up shares hit by recent sells off with ITV plc (LON:ITV) and Royal Mail PLC (LON:RMG) rising around 4% soon after trading began, even though the companies are set to leave the index for the FTSE 250. British Airways owner IAG (LON:IAG) is also flying higher, up nearly 3% in early trade. But the overall turbulence affecting the industry is continuing. Capacity problems affecting airlines show little sign of easing any time soon, with fresh cancellations due to baggage handling faults now appearing on screens at Heathrow. As the update from easyjet shows, the headwinds now constraining summer operations will be another delay to long awaited recovery for the industry.”
Article By Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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