Global markets tumble on profit-taking, oil prices surge amid red sea threats

On Wednesday, European and US equities experienced a widespread retreat fueled by profit-taking, while oil prices soared above $80 per barrel due to heightened concerns about Red Sea attacks disrupting shipping routes.

London, however, defied the downward trend as the FTSE 100 index surged, driven by news of sharply slowing inflation that raised expectations of a potential Bank of England interest rate cut.

The pound fell as investors speculated on the central bank’s response to the economic slowdown.

Analyst Patrick O’Hare from Briefing.com commented on the parabolic rise in major indices since late October, cautioning about the likelihood of profit-taking.

The rally, triggered by slowing inflation, has led investors to anticipate interest rate cuts by central banks next year, with optimism surrounding a soft landing for the US economy to avoid a recession.

Concerns were raised as FedEx reported a drop in volume and predicted a small decline in revenue for its fiscal year through March, causing a 10 percent decrease in FedEx shares at the opening of trading.

In Europe, data revealed a slowdown in UK inflation to 3.9 percent in November, the lowest rate since September 2021. Speculation arose about the Bank of England potentially cutting interest rates next year after having raised them to a 15-year peak of 5.25 percent to curb double-digit inflation. However, core inflation, excluding food and energy costs, eased only slightly to 5.2 percent in November.

Asian stocks mostly rallied, reflecting optimism from another record-breaking performance on Wall Street.

Traders bet on the US Federal Reserve slashing interest rates several times in the coming year, despite efforts by central bank officials to manage expectations and avoid an overly optimistic market rally.

The surge in oil prices continued, fueled by companies suspending transit via the Red Sea due to attacks on cargo ships by Yemen’s Iran-backed Huthi rebels.

This solidarity with Gaza has led to disruptions in the supply chain and increased transportation costs.

Looking at key figures around 1430 GMT:

New York – Dow: DOWN 0.2 percent at 37,482.94 points
London – FTSE 100: UP 0.8 percent at 7,701.07
Paris – CAC 40: DOWN less than 0.1 percent at 7,567.69
Frankfurt – DAX: DOWN less than 0.1 percent at 16,730.92
EURO STOXX 50: DOWN 0.2 percent at 4,525.91
Tokyo – Nikkei 225: UP 1.4 percent at 33,675.94 (close)
Hong Kong – Hang Seng Index: UP 0.7 percent at 16,613.81 (close)
Shanghai – Composite: DOWN 1.0 percent at 2,902.11 (close)
Currency and oil market movements:

Euro/dollar: DOWN at $1.0965 from $1.0981 on Tuesday
Dollar/yen: DOWN at 143.37 yen from 143.84 yen
Pound/dollar: DOWN at $1.2670 from $1.2732
Euro/pound: UP at 86.52 pence from 86.24 pence
West Texas Intermediate: UP 1.6 percent at $75.14 per barrel
Brent North Sea crude: UP 1.5 percent at $80.40 per barrel