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Market Report: Sliver of optimism but caution remains amid fuel protests

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Susannah Streeter

  • The FTSE 100 is gaining ground in early trade.
  • Oil is staying elevated around $112 a barrel for Brent crude.
  • Protests over cost of living hit the road networks.
  • Worries persist about the impact of a potentially prolonged US recession.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:

‘’A sliver of optimism has broken through on global markets at the start of the week, but overall caution is still the name of the game as investors nurse wounds from a bruising first half of the year.  A late surge on markets in Asia saw the Nikkei in the Japan and Shanghai Composite head higher, while the Hang Seng in Hong Kong crept up toward positive territory. Markets in Europe have opened higher, with the FTSE 100 gaining ground in early trade. Energy giants were among the big rises with oil staying elevated around $112 a barrel for Brent crude, as supply concerns persist.

There is no let-up in the summer of protests about the cost-of-living crisis in the UK, with fresh disruptions now affecting the road networks. Motorways will be on go slow due to protests by motorists demanding help with painful prices at the pumps. After last month’s strikes on the rail networks, mass cancellations at airports, upheaval on the roads affecting commuters, holidaymakers and logistics firms is the latest blow for the UK economy.

The pain of higher prices for British consumers pales into comparison to the experience in developing nations. Turkey’s inflation rate has hit 73.5% year on year, its highest in 23 years, as the country struggles to deal with soaring food and energy prices. Sri Lanka has ground to a halt, unable to pay for fuel imports as it grapples with hyperinflation and an economic crisis.  As investors fret about a hard landing in the US, some nations have already hit the concrete, and with little respite in sight for high energy prices, there will be no easy exit strategy.

The July 4th US holiday will be a pause for breath on Wall Street after stocks ended higher on Friday but investors still had to deal with another painful week of losses. There are concerns valuations may have further to fall, once earnings season begins mid-month and the impact of plummeting consumer confidence on revenues becomes clear.

Worries about the impact of a potentially prolonged US recession are still front and centre, as inflation remains stubbornly high. The concern is that there will be little salve available for the economy given than the US Federal Reserve will be so highly focused on administering bitter medicine of interest rate rises to bring the spiral of prices under control

The minutes of the latest meeting of Fed policymakers will be watched closely on Wednesday to give indications about just how steep the next hike will be, and Friday’s key jobs report is being keenly anticipated to show just how resilient the labour market is, in the face of deteriorating economic conditions. ‘’

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