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MARKET WRAP: FTSE slips lower, USD soft, crude higher

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Economy1 hour ago (Dec 10, 2021 16:34)

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Key Points

AB Foods says sees little Omicron impact on Primark footfall so far
UK GDP puts BoE rate hike in doubt
US CPI keeps Fed on course to speed up taper
USD softer; focus on central banks
Oil edges higher
Cryptocurrencies struggle with Bitcoin below $50K

By Samuel Indyk

Investing.com – The FTSE 100 edged lower on Friday, ending the week on a disappointing note following soft UK data.

Associated British Foods (LON:ABF) was in focus after the company provided a trading update pre-market. The Primark owner said like-for-like sales have improved in the first two and half months of the financial year and that Primark’s margin was ahead of expectations. The company added that the rapidly spreading Omicron variant has not really had an impact on footfall at Primark stores.

The UK economy grew just 0.1% in October, according to data from the Office for National Statistics, below expectations of 0.4% growth. The data adds to expectations that the Bank of England (BoE) will refrain from hiking interest rates when it meets next week. New COVID restrictions enacted this week had already led to some re-evaluating their expectations for a rate increase and most now seem to think the central bank will wait and see how the Omicron variant evolves before deciding to tighten policy.

“Although a rate rise can’t be completely ruled out next week, most bets are off that the Bank will push them up so soon, given this latest downbeat reading and the fact that the Omicron variant is still an unknown quantity in terms of the extra pressure it will put on the health service,” Hargreaves Lansdown (LON:HRGV) Senior Investment and Markets Analyst Susannah Streeter said in an emailed note.

In the US, focus was on inflation figures ahead of next week’s FOMC meeting. US CPI hit a near 40 year high of 6.8% last month, although that was in line with market expectations.

“The concern at the Fed will be that high inflation today can fuel expectations of higher inflation tomorrow and the day after that and so on,” analysts at ING said in a research note. “This can then feed through into wage demands and in an environment of decent corporate pricing power we see those costs post onto customers. The Fed will be keen to avoid this (or be seen willing to tolerate it), hence our expectations for a faster taper next week, with the programme concluding in February.”

Despite the surging CPI and expectations of faster Fed tightening, the USD was marginally weaker with EUR/USD trading back above 1.1300. Nevertheless, ranges were tight in major FX pairs with focus on next week’s central bank meetings from not only the Fed and BoE, but also the ECB and BoJ.

WTI and Brent crude futures both moved higher on Friday and were on track for the best week since August. Fears that the Omicron variant would wreak havoc on oil demand send crude lower over recent weeks but there is now growing optimism that the Omicron variant may not cause as greater damage to the recovery as previously feared. Focus will turn to the Baker Hughes US Oil Rig Count which is released at 18:00GMT.

Cryptocurrencies were struggling to gain any upside momentum with Bitcoin failing to climb above $50,000.

“Bitcoin is under pressure,” interactive investor Head of Investment Victoria Scholar said in an emailed note. “Technical indicators suggest that price action continues to look bearish with the next major support hurdles at $43,500 and at the psychological round number $40,000.”

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MARKET WRAP: FTSE slips lower, USD soft, crude higher

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