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Market Report: FTSE 100 feels the nerves as US earnings season kicks off

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  • UK market could end the week on a downbeat note as US banking head warns of slowdown
  • China Q2 GDP growth rate lower than forecast
  • Brent crude oil ends the week lower at around $100 dollars a barrel as demand concerns finally outweigh supply constraints

Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown:

“The FTSE 100 ended Thursday on a downbeat note, shedding 1.63%. The negative sentiment is unlikely to fully erode as we round off the week, with concerns stemming from JPMorgan Chase head, Jamie Dimons’s, comments. He pointed out the ongoing risk of inflation, monetary tightening, and constrained food and energy flows because of the Ukraine crisis. Those that thought the risk of recession has been priced into markets have been proved wrong, with the reaction showing there’s still room for the market to be shaken. With the major US tech names set to start reporting from next week, traders will be poised to see how margins are holding up in the previous stock-market darlings, and hoping they paint a prettier picture than the underperformance from US banks this week.

China’s GDP missed consensus by some distance in the second quarter, growing 0.4% year-on-year, against expectations of 1.0%. The slowdown is being blamed on ongoing outbreaks of Covid, reduced domestic demand, the risk of global stagflation and tightening monetary policy abroad. It’s not all doom and gloom though, with June’s economic activity looking a bit brighter as the government throws resources at stimulating business and infrastructure activity.

The UK Brent Crude benchmark dipped below $95 yesterday, to a level seen prior to Russia’s invasion of Ukraine. While prices have since climbed to around $99, this is still lower than the frothier prices we’ve seen in recent weeks. The decline comes as fears of a global economic slowdown mean there are questions over demand patterns, which is taking some of the friction out of the constrained supply and demand dynamics. This is unlikely to filter down to the fuel pumps just yet, with a lot of UK retailers much slower to pass on dipping wholesale prices, plus as the situation is a fast-moving one, we may well see some unexpected spikes in Brent pricing in the coming days and weeks.”

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