By Chris Dorrell
The FTSE 100 opened higher on Tuesday morning as markets continued to digest OPEC’s decision to cut production, sparking fears that it could lead to higher inflation.
The capital’s premier index rose 0.45 per cent at 7,707.05 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, climbed 0.41 per cent at 18,957.59 points.
Hargreaves Lansdown’s Susannah Streeter noted that markets were subdued amid “conflicting indicators”, although she expected the FTSE to maintain gains thanks to its oil giants.
“While equity markets have largely had a strong start to the year, attention is turning to what may happen next. A weak economic outlook and the new oil shock could inject some volatility into things in the short to medium term,” she said.
BP was up 0.5 per cent while Shell climbed 0.3 per cent.
The oil firms are set to benefit after OPEC and its allies, known as OPEC+, announced voluntary cuts to their production yesterday, amounting to around 1.15m barrels per day.
The price of oil surged to its highest level since January in response to the decision, trading around $85. Markets will now await how the price surge will impact inflation.
The FTSE’s top riser was Glencore, which rose 2.4 per cent despite having an unsolicited offer for Canada’s Teck Resources being snubbed yesterday.
The offer would have seen Glencore acquire Teck, creating a $90bn giant and requiring Switzerland-based Glencore to undergo massive restructuring.
Glencore’s bid reflects the latest shift in the mining industry, with commodity giants looking to make deals again and consolidate market shares of valuable minerals and metals.
Elsewhere Saga fell 6.7 per cent despite its revenue growing by more than 50 per cent as older Brits returned to cruises post-pandemic. However, revenue from its insurance business fell 7 per cent year-on-year.
Interactive Investor’s Victoria Scholar commented: “During the pandemic, Saga was hit hard during lockdowns when travel and cruises ground to a halt. Offsetting this was a sharp drop in insurance claims when fewer cars were on the road. Post covid, this dynamic has flipped with travel and cruises rebounding but insurance claims increasing.”
The pound rose 0.16 per cent against the dollar to trade at $1.2435. ING’s Chris Turner commented “Sterling continues to perform well and is certainly taking advantage of a weaker dollar. GBP/USD is now approaching strong resistance in the 1.2450/2500 area. These levels could be tested today should the US data come in on the soft side.”
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