Markets: Three things we learned this week
This week the markets had a lot to digest, bumper energy profits, the tail end of the banking sector’s latest round of results, and a rate rise from the Federal Reserve.
There was also some positive house price data, which gave the FTSE 100 a spring in its step. With Coronation weekend looming we take a look at the three things this four day trading week has taught us.
One: Good news is bad interest rate news
The release of better than expected US jobless figures could put a pause on the ‘will it won’t it raise rates’ speculation around the Federal Reserve. Well next week anyway. This week the Fed hiked interest rates for the tenth time in a row with its chairman Jerome Powell and the rest of the federal open market committee (FOMC), the group tasked with setting interest rates in the globe’s biggest economy, sent borrowing costs up 25 basis points to a range of five and 5.25 per cent.
Two: Energy companies’ bumper profits = ‘meh’
BP and Shell both – surprise, surprise – reported record profits and – surprise, surprise – there were renewed calls for the windfall tax to be increased. Labour’s Ed Miliband branded BP’s profits in the first quarter of this year, which were just shy of £4bn, “the unearned profits of war,” The shadow climate secretary argued that “every excess pound that the energy giants rake in is at the expense of British families,” which have been grappling with record energy bills over the past two years.
Shell followed BP, revealing a record year of £32.2bn profit – the cash came above the £7.2bn profits posted 12 months ago, when Russia’s invasion of Ukraine saw oil and gas prices soar. Shares did not follow suit and were trading down on markets although were expected to end the week on a positive note, maybe investors believe that a windfall tax hike may come along sooner rather than later.
Three: markets love a housing crisis
A flurry of reports signalled a return to a stable property market in the capital, but analysts have warned that the storm may not be fully weathered yet. As reports by Rightmove showed on Friday morning, first time buyers in the capital continue to be bearing the brunt of rising house prices with the average cost of a mortgage rising by £363 compared to last year. Supply and demand is still an issue, and is unlikely to be resolved any time soon. But that’s good news if you are a housing developer; a shortage of homes explains why Persimmon Homes share price lifted nearly four per cent mid week despite the group reporting a 42 per cent knock in the number of homes completed in the first leg of the year.