Market Report: Central Bank decisions, AI seesaw, and BP shakeup
- UK markets expected higher with BoE decision in focus
- AI narrative pulls US markets back and forth
- Oil rebounds from a near five-year low
- BP appoints new CEO
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“The FTSE 100 is set for a small lift at the open, but the wider European mood looks jumpy as investors wait for a packed day of central‑bank decisions. In the UK, the Bank of England is widely expected to cut rates by a quarter of a percent to 3.75%, helped by cooling inflation and a softer economy. But this is unlikely to be a full sweep, with some members expected to take a more cautious stance, and further moves in the new year will likely be slow and cautious.
US markets briefly edged higher yesterday afternoon before sliding into the close for a fourth straight daily drop in the S&P 500. The biggest drag came from big tech and chipmakers, as investors took profits and shifted money toward steadier areas like energy, basic goods and materials. Oracle was on Santa’s naughty list once again as investors worry about its spending commitments, and it’s starting to feel like the stress‑test stock for the whole AI spending boom. There’s some justification for that, but Oracle doesn’t have the same ‘blank cheque’ balance sheet as some of its more established cloud peers, who most definitely can afford to keep spending big.
US futures are pointing to a brighter start this afternoon, with stocks set to open higher. The revolving wheel of AI news delivered a blowout quarter from chipmaker Micron after yesterday’s close, offering a timely antidote to worries that the AI spending boom is getting ahead of itself. With softer jobs data now behind us, the spotlight turns firmly to today’s inflation reading, which could set the tone for where markets head next.
Brent oil rose back above $60 a barrel, helped by rising tensions that could make it harder to move oil around the world. The US is tightening the net on oil linked to Venezuela, and is also weighing tougher action on Russia, both of which could squeeze supply. In the US, stockpiles fell again last week, which also gave prices a lift, even as petrol and diesel supplies increased.”
Derren Nathan, head of equity research, Hargreaves Lansdown:
“In a world of J R Ewing style oil barons, BP has appointed Meg O’Neill as the first external candidate to take BP’s top job. She’s also the first woman to run an oil major. But the Colorado native is already an oil veteran. After 23 years at ExxonMobil, she joined Australia’s Woodside Energy in 2018, where she’s been CEO since 2021. One of her key milestones was the acquisition of BHP Petroleum, giving Woodside full ownership of the Scarborough Gas field and the Northwest Shelf LNG project.
With the sector facing pressure, consolidation is the talk of the town, but BP is most frequently seen as prey rather than the hunter. Rival Shell has distanced itself from takeover speculation, but there are other potential suitors. O’Neill may have a fight on her hands to ensure BP’s not sold for a song, and to keep a seat at the table if it were to join forces with a competitor. Murray Auchincloss’s future has been in the balance ever since activist investor Elliott Investment Management took over a 5% stake in BP. Chairman Helge Lund went earlier in the year, and the legacy clear-out is now complete. Investors will now be hoping O’Neill has a firm plan to shore up the balance sheet, improve profitability and define BP’s role in the energy transition.
