HL commentary as it happens

Oil prices up with geopolitical pressure elevated

Brent Crude oil prices have strengthened to $63.8 per barrel. The potential for further rate cuts to stimulate demand, as well as ongoing concerns of oversupply, are being overshadowed by a lack of progress in finding a lasting peace between Russia and Ukraine, and with it sanctions on exports of Russian fossil fuels. The rising possibility of US military action in Venezuela puts a further 1.1 million barrels of daily production at risk.

Quarter point rate cut expected by the Fed on Wednesday

Events in the United States that will take centre stage this week. Anything other than a quarter point cut to Fed Funds Rates on Wednesday will come as a big surprise but cast your eyes forward 12 months and the waters become much muddier. Markets see two further quarter point cuts as the most likely outcome but the probability of a doveish third cut, or just a hawkish single cut isn’t that far behind. It’s commentary for 2026 and beyond that’s likely to be the key focus for markets.

With US jobs under pressure, inflation still above target, and lending rates 1.5 percentage points below the peak, already it’s a balancing act that’s becoming ever trickier. One thing looks certain, the days of sub 1% rates borrowers became accustomed to post the Great Financial Crisis are over with theoretical ‘neutral’ rates more likely to be in the 3% region. That’s not necessarily a problem though and remains relatively benign by historical standards. One thing that can help the economy tolerate a higher neutral rate is productivity growth. There’s a lot of hope resting on Artificial Intelligence to provide that boost, but as with all technological shifts, the size and speed of this change is difficult to second guess

UK retail sales and GDP numbers due this week

The FTSE is holding its head above water this morning after a weak session on Friday.

Key UK data points to look out for this week include November’s retail sales figures which are scheduled Tuesday. The previous month saw sales contract by 1.2% and with pre-budget caution likely to have dominated in November and accountants BDO playing down the success of Black Friday promotions, tomorrow’s numbers could struggle to get back into positive territory.

Turning to the wider economy, GDP numbers for October are expected to land on Friday. Forecasts are looking for a 10-basis point acceleration in monthly growth to 0.2% after a cyber-attack at Jaguar Land Rover weighed on the September numbers.

Oil extends recent gains

Brent crude oil is edging up toward $63 a barrel, as Ukrainian strikes on Russian oil sites and stalled peace talks keep supply fears alive. Washington’s latest hard line on Venezuela is adding another spot of upward pressure into the mix. Still, prices are down double digits for the year, a reminder that the broader trend is softer. For most households and businesses, that’s a win - lower energy costs are a key factor in keeping inflation under control.

US markets edge higher on rate cut hopes

US stocks pushed through some early jitters, closing higher again, reinforcing the sense that momentum is back as rate-cut expectations firm up. Investors are leaning into the idea that easier policy is coming, which is fuelling appetite for risk and lifting everything from blue chips to small caps. Still, with inflation data and Fed decisions ahead, the path is far from set in stone.

Expectations have swung wildly over the past month, so assuming any cuts are a done deal could be a costly mistake, and volatility can just as quickly return if the rate cutting narrative shifts. One thing’s clear, if markets want a Santa rally, they need the Fed to stay in line.

FTSE 100 higher at the open, closing in on a strong year

The FTSE 100 is pushing higher at the open, riding the same wave of optimism as US markets with rate-cut hopes lifting risk appetite. With a strong December finish, UK’s blue-chip stocks could edge past the S&P 500 for rare annual performance bragging rights - the two are neck and neck right now.