One week of markets in one minute: Latest commodity calamity halts march of blue chips

A sharp reappraisal of the world’s supply of oil cost the UK’s leading share index this week, with a dismal report from Royal Dutch Shell showing the damage the supply glut is doing to oil majors and halting the march of the wider index.
In a week tipped to be dominated by monetary policy, instead it was the avalanche of company results – some particularly negative – and a sharp decline for some commodities which impacted UK markets.
At a company level, chief among the negative reports was Shell’s announcement that its second quarter profits had dived more than 70% as the low oil price environment took its toll on the group.
Losses at Shell and peer BP, which finished the week down a hefty 7% and 5% respectively, weighed on the wider index, with the FTSE 100 closing at 6,734, down 6 points on the week.
Adrian Lowcock, head of investing at AXA Wealth, said there could be more examples of this level of volatility at an individual stock level in the near term amid lower trading volumes.
“The oil majors had done very well leading up to this week, and this was a case of that bad news they had effectively put behind them coming through in the numbers,” he said.
“I would expect to see individual company volatility continue to pick up near term as companies report, because trading volumes are lower at this point in the year.”
Looking specifically at commodities, oil finished the week down some 7%, with Brent crude back at $42.30 and within bear market territory from its intraday June high. The price has relapsed following surging supply data.
However, gold climbed once more, up 2% on the week to hit a three-week high at $1,346. Investors are speculating that monetary policy announcements, while delayed this month, will come through this quarter and impact the value of fiat currencies.
While the FTSE 100 experienced a setback, the FTSE 250 climbed once more, finishing the week just shy of 2% firmer at 17,282 points. However, it still remains below its pre-Brexit high and has lagged the FTSE 100 since the EU referendum result.
Thesis Asset Management explained why in its latest client update: “The FTSE 250 has underperformed the FTSE 100, mainly as a result of its overweight consumer sensitive sectors, such as house builders and financial services that are considerably more vulnerable to news on UK growth and the risks surrounding Brexit.
“On top of this the large cap FTSE 100 benefits from being more international with roughly 80% of sales outside the UK.”
Away from equities, UK government bond yields also fell sharply on the week, closing at 0.685% on Friday, compared to last week’s close of 0.798%.
The Brexitometer
In the wake of the crisis, and in order to provide a quick and easy snapshot of the real impact of Brexit on markets, we will be updating the Brexitometer weekly, detailing the impact of the EU referendum result on UK markets.
FTSE 100: UP 6.1%
6,338 points at close on 23 June.
6,724 points at close on 29 July.
FTSE 250: DOWN 0.5%
17,334 points at close on 23 June.
17,283 points at close on 29 July.
FTSE All Share: UP 5%
3,481 points at close on 23 June.
3,654 points at close on 29 July.