Markets Wednesday Open: FTSE Rally Extends; Brent at Three-Month Low; Gilt Yields at Four-Month Low
UK and European markets extend the post-deal rally Wednesday. The FTSE 100 opens at 10,685, up 0.19% on Tuesday’s close. Brent crude eased to $87.80 a barrel, near a three-month low; UK 10-year gilt yields slipped to 4.82%, a four-month low. The Bank of America raised the probability of an August Bank Rate cut to 35% from 25% pre-deal. The Federal Reserve decision later this week is the binding global macro variable; the Fed is expected to hold rates, supporting the dollar and limiting upside in sterling.
The Brent $88-95 band that delivers a flat Ofgem October price-cap reset is now squarely in the operative range; Brent at $87.80 sits at the lower bound. The Bank of England MPC’s decision this week is materially easier with Brent at $88 and gilt yields below 4.85%; Chancellor Rachel Reeves’ fiscal-headroom position is materially eased through the leadership-transition uncertainty. The political-mathematical question for the Chancellor is whether the Burnham continuity-signal positioning crystallises before the post-Makerfield Friday-evening cycle. The Burnham-Reeves continuity signal continues to ease the gilt-market positioning.