FTSE 100 rally finally loses steam
​The FTSE 100 fell 0.2% on Friday, snapping a nine-day winning streak that had taken the index to all-time highs. Banks, miners and energy stocks led the decline, as lower risk appetite in global markets led investors to lock in profits after the recent rally.
​Sterling held just above $1.31, down 0.1% on the day, while bond yields were little changed. The muted currency and bond moves reflected market uncertainty over the Bank of England’s (BoE) next steps, with expectations of rate cuts rising but not yet fully priced in.
​Despite Friday’s drop, the FTSE 100 has significantly outperformed its European peers in recent weeks. The index’s defensive characteristics and its exposure to overseas earnings have provided insulation from domestic growth concerns that continue to weigh on sentiment.
​The pullback was modest but marked the end of London’s most sustained winning streak in months, as traders reassessed valuations following the recent rise through October on dovish signals from central banks and resilient corporate earnings.
Speculation intensifies over Bank of England rate cut
​Barclays economists joined Goldman Sachs in forecasting a 25 basis point rate cut at next week’s Monetary Policy Committee meeting, describing a 5-4 vote in favor of easing as “compelling” given weakening growth and cooling inflation. The decision adds weight to expectations that the Bank of England will resume cuts after a pause in September.
​Market prices remain cautious, with traders assigning roughly a 24% probability to a cut in November, which equates to just six basis points of easing. This suggests a significant rise for the pound if the Bank of England disappoints dovish expectations, but also room for a strong move lower if policymakers signal more aggressive easing ahead.
​The case for cuts has strengthened as recent data showed stagnating growth and falling inflation faster than expected. Services inflation, the Bank of England’s main concern, has moderated more quickly than expected, giving authorities room to act without reigniting price pressures.
However, the labor market remains tight and wage growth is high, factors that could give committee hawks ammunition to argue for holding steady. Next week’s decision is genuinely uncertain, making it one of the most important BoE meetings in recent times.
​House prices and business activity defy pessimism
​National data showed house prices rose 0.3% month-on-month (monthly) in October, defying forecasts of no change and taking annual growth to 2.4%. Mortgage approvals remain close to pre-pandemic levels despite elevated borrowing costs, as strong household balance sheets and rising real incomes offset costly financing.
​The resilience surprised analysts who had expected the housing market to weaken, suggesting that UK housing has found a floor even if the conditions for a sustained rebound remain absent. For the Bank of England, rising house prices complicate the rate cut calculation, although current levels are unlikely to derail gradual easing plans.
​Canned food supplier Princes Group has priced its London listing at 475 pence per share, valuing the company at £1.16 billion, with trading starting today under the symbol PRN. The deal marks another development in a modest revival of the city’s initial public offering (IPO) market, suggesting investors remain willing to back defensive deals.
Precious metals miner Fresnillo announced plans to acquire Canada’s Probe Gold for C$780 million, expanding its project portfolio beyond Mexico. The strategic shift diversifies away from political risk while providing exposure to Canadian gold assets at a time when gold trading activity has recovered due to safe haven demand.
Oil extends its fall due to the brutal prospects of excess supply
​Oil prices continued to fall, with Brent crude falling below $73.00 per barrel, as growing evidence of a structural oversupply weighed on sentiment. The latest forecasts from the International Energy Agency show that global oil supply is projected to increase by about 2.5 million barrels per day in 2025, while demand growth is inching at just 0.7 mb/d.
​The mismatch will worsen until the end of the decade, with the IEA predicting that demand growth will slow to “just a trickle” by 2030, as renewable energy consumption increases by 60% by the end of the decade. Meanwhile, supply capacity continues to expand as U.S. producers ramp up output and OPEC+ members prepare to return barrels to the market.
The dynamics of oversupply have taken many investors in the commodities trade by surprise, particularly those betting on sustained strength in energy prices. The structural shift toward oversupply represents a fundamental shift from the tight markets that prevailed through much of 2022 and 2023.
​A firmer US dollar has increased pressure on oil trading, making dollar-denominated commodities more expensive for holders of other currencies. Unless demand surprises to the upside or supply faces unexpected disruptions, the path of least resistance for crude oil appears lower than current levels.
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