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MARKET WRAP: US releases oil from SPR, Turkish lira suffers meltdown

Economy1 hour ago (Nov 23, 2021 16:20)

Key Points

Oil higher despite coordinated reserves release
Pets at Home shares higher after results
AO World shares decline amid supply problems
Turkish Lira meltdown continues
Cryptocurrencies steady with Bitcoin below $50,000

By Samuel Indyk – The FTSE 100 ended the session higher on Tuesday, reversing earlier losses as large-cap energy names rose despite the US and allies taking measures to lower oil prices.

The White House announced that the US – along with China, India, Japan, South Korea, and the UK – would release oil from strategic reserves to help lower prices. The US said it would be releasing up to 50 million barrels; 32 million will be an exchange over the next several months that will be returned over the years ahead, and 18 million barrels will be an acceleration into the next several months of a sale of oil that Congress had previously authorised.

The UK announced that privately-held oil reserves may be released voluntarily, up to the equivalent of around 1.5 million barrels.

The announcement of the action did little to lower Brent or WTI prices in the near term with focus now turning to next week’s OPEC+ meeting. On Monday, a delegate said that the cartel could pause planned supply increases if the US and allies released reserves.

Shares in BP (LON:BP) and Royal Dutch Shell (LON:RDSa) were both up by over 1.5% as oil prices turned higher.

In the midcap FTSE 250, Pets at Home (LON:PETSP) was one of the best performing stocks after a trading update pre-market. Underlying pretax profit was up 77.2% and the company said it now expects full year profit to be at the top end of analyst expectations.

“Conditions don’t get much better for a pet superstore,” writes Hargreaves Lansdown (LON:HRGV) Equity Analyst Sophie Lund-Yates. “The overall picture is a rosy one at the moment, especially with the phenomenal cross selling opportunities afforded by the successful VIP customer initiative, as well as vet and grooming services.”

Another company that initially benefitted from the pandemic has not fared so well in recent months. AO World (LON:AO) shares declined over 25% at the open as the company downgraded its forecast, citing supply chain issues and increased competition in Germany.

“The company is currently in a parlous position,” said Richard Hunter, Head of Markets at interactive investor. “The well-publicised supply chain disruptions have had a severe impact, with a shortage of delivery drivers a particular issue.”

In FX markets, the Turkish Lira was in focus with the currency coming under severe selling pressure. USD/TRY soared above 13.00 for the first time ever, having only jumped above 12.00 for the first time earlier in the morning.

“The sell-off was triggered after Erdogan defended the CBRT’s controversial commitment to lower rates while inflation racing upwards,” said Nordea analysts Philip Maldia Madsen and Andreas Steno Larsen in a research note. “It is hard to imagine a scenario in which TRY turns into a good fundamental case as long as Erdogan effectively runs monetary policy.”

President Erdogan reportedly met with the current central bank governor, Sahap Kavcioglu, following the decline in the currency.

In more stable FX markets, the EUR was trading higher following comments from influential European Central Bank Executive Board member Isabel Schnabel. The German policymaker said inflation risks are “skewed to the upside”, which some analysts have taken to view that the central bank is looking to tone down its aggressive stimulus.

“Isabel Schnabel’s interview gives, in our view, clear hints at how the ECB will try to cautiously join the exit lane,” said ING Global Head of Macro Carsten Brzeski. “The ECB meeting on 16 December is still some way out but the discussion at the ECB has clearly started. We expect the ECB to end PEPP in March 2022, introduce a new third transition purchase programme and to gradually move over to APP as the only asset purchase programme.”

Bitcoin and other major cryptocurrencies continued to struggle to push higher, with Bitcoin soft below $60,000.

“It [Bitcoin] has found fresh support around $55,500 which could offer some encouragement but only a move back above $60,000 really puts us back into bullish territory,” OANDA Senior Market Analysts Craig Erlam said in an email.


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MARKET WRAP: US releases oil from SPR, Turkish lira suffers meltdown

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