Danni Hewson, AJ Bell financial analyst comments on today’s markets:
“I filled up my car for the first time in ages at the weekend, seduced, like many of us, into taking advantage of the bank holiday and enjoying a short break away from home. Hybrid working has slashed my commute and after watching the numbers on the pump tick up, I have to say I was pretty grateful that’s the case. It doesn’t feel like that long ago I was commenting on the astonishing circumstances that had me forking out £1 for a litre of petrol. After today’s massive jump £2 a litre doesn’t seem far off. And the price of petrol is important, not just to motorists, but to every single one of us. Most of the stuff we buy is transported, at least the last few miles, by road. Haulage companies are already warning the extra costs they’ve passed on are only the start, and that uncomfortable fact means already sky-high prices are going to get even more expensive.
“For businesses, it’s another extra demand on their consumers’ already strained budget. Competition for our patronage will push some business owners to slash their prices and that’s going to eat into margins, the bread-and-butter businesses need to survive.
“Some, like Wizz Air, will hope that charging a bit more for their services won’t put too many people off. But bums on seats aren’t the only metric required for success, as witnessed in the firm’s last set of results.
“There is mounting pressure for further government intervention, and dire warnings about the prospect of no growth for the UK economy next year will smart. The whole world is paying the price for Russia’s invasion of Ukraine but, according to the OECD, the UK has been singled out. More needs to be done to fuel the engine, spark growth and prevent stagnation as well as softening the blow inflation is dealing to the poorest in society. But it’s undoubtedly a balancing act – too much stimulation could just send prices higher and keep them higher for longer.
“Gloomy growth forecasts have weighed down London markets. The housing market is cooling, the construction sector slowing and consumer confidence looking distinctly anaemic. On the horizon that US inflation number may support the argument that prices have peaked, but there are no guarantees and that’s making investors on both sides of the Atlantic nervous.
“There are glimmers of good news to latch onto. Soaring sales from Zara owner Inditex, an uplifting outlook from food staple giant Campbell Soup and, perversely, the robust price of oil keeping energy giants on the front foot. But the rollercoaster is nowhere near at the end of its ride and investors would do well to check they’re strapped in.”
