Risk Off Pulls FTSE Lower Oil UK Jobs US Earnings In Focus

After eking out small gains at the start of the week, the FTSE is heading lower on Tuesday as risk off mode returns. Amid concerns over the health of North Koreas leader Kim Jung Un, the unprecedented move in the oil markets not even an upbeat UK jobs report has been able to stop the bears.

Paying to sell oil
The price on some futures contracts on WTI traded in negative territory for the first time in history overnight as the global oil glut has become so large that there is no longer space left to store the oil. The market panicked and the price fell to an unprecedented historic low of $ -37.63 overnight. No one was willing to buy oil contracts that expire today, and those who were willing to buy and store were rewarded.

What is happening should shock the oil producers into acting in a more meaningful way to shore up the price of oil. Despite the covid-19 lockdown oil producers continued pumping oil regardless of the growing glut. The planned OPEC cuts aren’t set to kick in until 8th May. It will take either a hefty increase in demand, or another round of deeper cuts to take the panic out of the market. Given that any easing of lock down measures will be slow and controlled, that only leaves more action from OPEC+ as an option to stabilise the price.
Energy stocks are unsurprisingly falling hard on the open and could struggle to find a floor in the current climate.

UK jobless claims jump – a hint of what’s to come
UK jobless claims increased by a better than expected, but still horrendous 12,200 in March, well above the 5,900 count from the previous month. This figure gives us a taste of what is to come. The UK will have been on lock down across the whole of April, meaning economic activity will have been on hold for a month, unemployment is expected to keep on rising.

The UK figures are holding up better than in the US, which has seen a jobless claim jump by 21 million over a 4-week period. This is because firstly the US measures on a weekly basis rather than monthly, meaning that it is more current. Secondly, the UK governments furlough system is also offering significant support. So far British firms have put 1 million employees on leave, with the government to pay 80% of their wage. These people may otherwise have been made redundant. Whilst the pound managed to pick up off session lows sub $1.24 following the jobs report, sterling continues to trade weaker versus the safe haven US Dollar. This at least offers some support to the FTSE.

Day ahead
Looking ahead there are plenty of events which could inject further volatility into the markets. US homes sales will be in focus later today. With social distancing preventing sellers from meeting buyers and houses from being viewed, a steep fall in sales is forecast. AA drop in the region of -8.1% has been pencilled in. Finally, US stock stocks earnings kick off today with Netflix and Snap in focus.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.