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MARKET WRAP: FTSE finishes higher ahead of Fed, Brent hits $90/bbl

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Key Points

FTSE 100 closing price of 7,470.1 (+1.3%)
Oil stocks higher as crude rallies
Travel stocks surge on recovery hopes
Fresnillo (LON:FRES) drops after Q3 results
USD higher ahead of Fed
Crypto rebound continues as Bitcoin breaks above $38K

By Samuel Indyk – The FTSE 100 finished higher on Wednesday with focus on the Federal Reserve’s monetary policy announcement at 19:00GMT. The Fed is expected to lay the groundwork for a rate hike as early as March due to rising inflation and an improving labour market.

Adding to the inflation picture is rising oil prices. WTI and Brent crude futures both surged on Wednesday, the latter hitting $90/barrel for the first time since 2014 as rising tensions in Eastern Europe continue to support prices. The escalating situation on Ukraine’s border with Russia has helped push prices higher with any conflict potentially having an impact on production. Russia is the third largest oil producer in the world, behind the US and Saudi Arabia.

The higher prices have helped push energy companies higher. BP (LON:BP) and Shell (LON:RDSa) were near the top of the blue-chip index with shares in both companies higher by over 3.5%.

Travel stocks were strong on hopes that the international travel recovery will continue apace this year. British Airways parent IAG (LON:ICAG) led the way higher following a positive note from Stifel Nicolaus, who named the company a “top pick”.

“We believe the combination of vaccinations, forthcoming COVID drugs, milder symptoms of the Omicron variant and increasing political laissez-faire sets the scene for a dynamic traffic recovery this summer and the crisis potentially moving to its end-game,” Stifel analysts said in a note.

Shares in silver and gold miner Fresnillo declined as the company highlighted production issues in the coming year. COVID continues to be a problem for the company with the disruption from the Omicron variant expected to continue in the first quarter of the year. The firm also highlighted new labour regulations in Mexico which meant higher turnover and staff vacancies.

The USD traded higher ahead of the Federal Reserve meeting with US Dollar Index above 96.00. GBP/USD was relatively flat and trading in a tight range as markets await the key monetary policy decisions from the FOMC.

Bitcoin and other major cryptocurrencies continued their rebound after hitting multi-month lows on Monday. Bitcoin traded back above $38,000 as US stocks also rebounded, with the S&P 500 up around 1.0% when European equity markets closed.

“The recovery in Bitcoin over the last couple of days has been really encouraging,” writes OANDA Senior Market Analyst Craig Erlam. “It’s not out of the woods yet though and if broader risk appetite takes a hit, I’d expect bitcoin to suffer more. Whether that will see it test the crucial $30,000 region, only time will tell, but traders will be very relieved at what they’ve seen this week.”

One piece of Bitcoin news that some traders are focussing on is a snippet from Ark Invest’s Big Ideas for 2022. Cathie Wood’s firm said the price of Bitcoin could exceed $1 million by 2030 as the cryptocurrency is used in remittances, as EM currency, held in sovereign Treasury reserves and corporate Treasury, among other factors.


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MARKET WRAP: FTSE finishes higher ahead of Fed, Brent hits $90/bbl

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