Revived hopes for a resolution to the crisis in the Middle East have helped sustain a recovery in global equities but European stocks took a pause for breath on Friday.
The FTSE 100 wasn’t helped by its heavy weighting in energy as BP and Shell reacted to further falls in the oil price. Brent crude declined for a third consecutive session, even if it remains stubbornly above the $100 per barrel alarm bell mark.
A pullback in oil has dialled down fears about inflation and helped government bond yields ease from their recent multi-year highs.
We have seen this story play out in microcosm multiple times over the months since the Iran conflict started in February, with a more concerted move lower for oil likely to require more solid evidence of diplomatic progress in the short term.
However, there will be relief that equity markets have successfully navigated a week where the US Federal Reserve put up rates and the Bank of England kept its powder dry but signalled clearly that a UK rate hike might not be far away.
Some weakness in the dollar helped gold prices, with a weaker US currency making the precious metal cheaper for non-dollar buyers, and this supported gold mining stocks in London.
Banks and investors in global tech firms were among the other names making progress on the UK market in early trading. Strong retail sales numbers failed to inspire gains among retailers, with investors mindful of the ongoing risks to consumer sentiment.
Glencore
Neither the mining sector as a whole or Glencore itself have an unblemished track record on corporate governance and that may colour the market reaction to recent events.
The company has reportedly suspended top executive Peter Hill, the head of steelmaking raw materials, as it reviews its ties to iron ore trader Radiant World. The latter having filed a $2 billion legal claim against three Glencore entities in Singapore this week.
Radiant alleged that Glencore has kept the ‘true nature’ of its trading arrangements out of audited records while Glencore says it has evidence of fraudulent behaviour by Radiant.
Glencore shareholders will want the matter resolved as soon as possible given its capacity to deflect attention from the company’s strategic progress and divert management time and resources away from growing the business.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...