European markets started in fairly sober mood – with UK stocks no exception – unsurprising perhaps given some tough rhetoric from the US Federal Reserve on interest rates and the latest round of sanctions imposed by the West on Russia yesterday.
Both the cure, higher interest rates, and the disease, surging prices, are harmful to markets right now. The minutes from the Fed’s latest meeting showed it plans to drastically scale back asset purchases and that there is backing among its members for big rate hikes, all helping to pour cold water on investor sentiment.
“Amid the latest Russian sanctions, Shell has quantified the hit from its exit from the country at a larger than initially anticipated $5 billion – the modest resulting fall in its share price reflects the fact that the company is also pointing to a big benefit from surging energy prices,” said AJ Bell’s Russ Mould.
“BP endured the heavier fall, likely on a read-across as investors looked at what it might imply for its much larger Russian footprint.
“The UK Government has launched a long-term strategy for secure and sustainable power. Predictably the plan has attracted criticism from opposition politicians – a key point being the reluctance to give full backing to onshore wind and the apparent openness to boosting fossil fuel production and reconsidering fracking.
“Nuclear power is central to the strategy – however this will do little to help the current struggle facing businesses and households from a drastic rise in electricity and gas prices with the lead times on building new reactors often longer than a decade.
“Despite cost-of-living pressures the UK housing market continues to defy gravity, enjoying their biggest jump in six months according to data from Halifax. The dynamics of insufficient supply and strong demand continue to underpin prices, but you have to believe that will change at some point and, when the market turns, it could be painful.”