The price of oil is rising again this morning after the US military said it knocked down an Iranian missile barrage and worked with Saudi Arabia forces to strike sites in Iraq that Tehran-backed militias have used to launch attacks in recent days.
In what Washington called “an attempted surprise attack” by Tehran, Iran had launched multiple ballistic missiles at US forces in the Middle East, ending a brief pause in fighting. Iran’s target was a US base in Jordan, according to Axios.
The news has sent Brent crude, the international benchmark for oil prices, up 3.8% to $87.26 a barrel this morning.
Meanwhile, in Asia the rout in chip stocks has continued overnight – the South Korean stock market, which relies heavily on the chip companies SK Hynix and Samsung Electronics, has lost a further 8.3% today. SK Hynix shares slumped 9% even after reporting a sixfold surge in its quarterly profit, while shares in Samsung (which is due to report its earnings tomorrow) dropped 6%.
It follows another tough day of trading for US chip stocks, which dragged the Nasdaq down 1% yesterday. Sandisk fell 14%, while Western Digital and Micron dropped 6.9% and 8.9% respectively. Advanced Micro Devices fell 8.1%.
It is an upbeat start to the day for European stock markets – the Stoxx Europe 600, which tracks the biggest companies on the continent, is up 0.3%.
The UK’s blue chip FTSE 100 index is up 0.6%, led by a 1.9% rise in its basic materials sector after some strong earning reports this morning. The German Dax and the French Cac 40 are up by about 0.3%.
That being said, Europe is not completely immune to the chip stock sell-off seen in Asia and the US – its worst performers today include the chip companies Infineon Technologies and ASML, both down by about 1%.
Higher oil prices and the continued sell-off in chip stocks creates an uncertain environment before the Federal Reserve’s interest rates decision later today, Jim Reid from Deutsche Bank said.
“All that leaves a volatile backdrop ahead of today’s FOMC decision, which is the most finely poised in years in terms of market pricing,” he said. “With a 32% chance of a rate hike today priced as of last night, this is the most uncertain that the market has been on whether the Fed will change rates going into a meeting since December 2018, when the eventual 25bps rate hike was about 65% priced the day before.
“We’ve seen considerable volatility in the July hike pricing over the past couple of weeks, falling as low as 10% in mid-July following the soft June US CPI print but rising to as high as 38% on Monday. So with chair Warsh shying away from policy guidance, we’ve seen one regime shift compared to the past few years when markets received a steer from officials’ commentary or via the financial press.
“In terms of today’s decision, our US economists expect the Fed to leave rates unchanged but see the risks of a hike as significant with the renewed escalation in the Middle East complicating the inflation outlook. If the Fed holds rates steady, they expect at least a couple of dissents in favour of a hike.”
Today’s key events
• 9.30am BST: ONS workless households data
• 7pm BST: US Federal Reserve decision on interest rates
• 9pm BST: Microsoft Q4/FY
• 9.30pm BST: Meta Q2
We’ll be tracking all the main events throughout the day on our business live blog …
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