Sprinkle of positivity sweetens financial markets despite inflation worries prompting mass strikes in UK

A sprinkling of positivity sugared financial markets, masking the bitter taste induced as investors were forced to assess the impact of soaring inflation on the global economy.

A mini-return from last week’s deep selloff is expected in US indices, after traders returned from the June 19 holiday.

This follows a wave of buying in Europe on Monday and in Asia today as investors entered stocks pushed lower in the recent rout.

The price of oil edged higher as concerns over supply in global markets rise amid renewed efforts to prevent Russia from earning revenue from crude.

This follows comments by US Treasury Secretary Janet Yellen about working with allies to impose a price cap on still-sold Russian oil, in a bid to limit flows into the country’s war chest.

Brent Crude rose to $114, recouping some of last week’s losses and offsetting expectations of lower demand amid a global slowdown.

Rising oil prices pushed up BP and Shell stock prices which had been dragged lower in recent sessions.

The FTSE 100 opened higher, but gains could be capped with the risks of inflationary pressures returning to center stage.

A massive walkout by railway workers in the UK, which is expected to wreak havoc across the transport network, is indicative of the problems piling up for the UK economy as the cost of living crisis deepens.

It’s easy to see why workers are desperate for wage increases to make ends meet, but it carries the risk of deepening the inflationary spiral at a time when policymakers are focused on reducing demand in the economy. .

If public sector wages rise close to the rate of inflation, this could end up offsetting the Bank of England’s efforts to try to bring inflation down.

The huge strike is a precursor to another worryingly expected glimpse of scorching consumer prices, with the CPI’s measure of inflation released on Wednesday set to rise further.

Although inflation is expected to climb to 11% by the fall, the Bank of England is reluctant to accelerate rate hikes for fear of triggering a deep recession.

However, another searing inflation reading should pressure policymakers to take a tougher stance.

The pound is still hovering around its lowest level in two years against the dollar, at $1.22, as it is behind the steep curve of rate hikes taken by the Federal Reserve and concerns persist over the poor prospects.

Shares of Ocado lost further ground, plunging 4% in early trade, as investors assess its plans to fuel expansion and growth with a new capital raise.

Concerns have intensified over rapidly rising costs for the retailer amid mounting losses, especially as shoppers are also showing signs of putting less in their virtual shopping carts as the cost of living crisis s ‘worsen.

Susannah Streeter

Susannah Streeter, Senior Investment and Market Analyst, Hargreaves Lansdown.