Monday Update on Oil, US inflation and Sterling Pound

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Miners, oils help FTSE 

The FTSE is holding up this morning, trading 0.36% higher, unlike its European peers which are on the slide as some of the inflation-induced malaise in the US market is beginning to spread into Europe.

In London, a rise in mining and oil stocks is balancing out a fierce decline among tobacco stocks caused by US plans to ban menthol cigarettes. British American Tobacco lost 8.4% this morning and Imperial Brands is trailing behind with a 3.3% decline.

Inflation hits US markets

Last week’s trading in the US ended up despite a sour note following a sharp increase in the country’s wholesale price inflation which in turn stoked fears that the Fed will have to speed up its rate hikes and consequently slow down the growth of the US economy sooner than expected. Unpicking the wholesale numbers, the two biggest contributors to the increase were high oil prices and rising industrial supplies costs. The US household inflation data is due out this week and is likely to reinforce signs that prices are overheating. But there is also a ray of light in that oil prices have fallen sharply over the last month and that WTI is now trading very close to $60.  With oil being a major contributor to inflation this should translate into slower price rises in November and potentially give the Fed some breathing space.

No rest for the wicked …

… or in this case, the pound. Sterling is not getting any respite from the Brexit yo-yo of British politics as weekend papers remain full of headlines spelling gloom for any Brexit proposal that is currently on the table. The pound is down 0.89% against the dollar and 0.29% against the euro. The common currency isn’t doing much better against the dollar as concerns about how Brexit, a change of leadership in Germany and Italy’s unruly budget will affect the region’s economy weigh. Oil is also on the move, rising after Saudi Arabia announced supply cuts in December and possible reductions in early 2019.

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