Markets report: Oil market taps into vaccine positivity

What happened to the FTSE, pound and UK companies on the markets today?

US crude oil broke above $45 a barrel for the first time since early March on Tuesday, as markets continued to rally on vaccine hopes and the formal start of president-elect Joe Biden’s transition to power.

WTI futures passed the threshold in New York during the mid-afternoon, marking the highest price since March 6. The oil rally came amid a wider risk-on mood across global markets which has run through much of November – with investors welcoming a succession of positive vaccine trial results and Donald Trump’s looming ejection from the White House.

SEB chief commodities analyst Bjarne Schieldrop said investors can now see a clearer path ahead, with the demand pressures sparked by the pandemic easing.

“The oil market has for a long time been shrouded with fog, with predictability extremely difficult with respect to both the timing and magnitude of an oil demand rebound,” he said. “This fog has now been lifted and blown away.”

In the longer term, Mr Schieldrop warned, the Biden administration is likely to be “bad news for oil”, given the Democrat’s plans to accelerate the US’s green energy transition and renew American support for climate change initiatives.

In London, equity markets rose solidly as investors continued to rotate away from lockdown winners and into neglected energy, aviation and travel stocks.

BP and Royal Dutch Shell both jumped against the improving demand backdrop, with the former closing up 21.4p at 274.8p.

Shell rose 73.4p to £13.26, with the two giving the FTSE 100 a strong upwards pull.

At the opposite end of the scale, shares in JD Sports fell 52.8p to 760p following reports that the group is considering a bid for struggling department store Debenhams.

A lack of M&A updates put a dampener on water group Pennon’s first-half results. It fell 39.8p to 964.2p despite a solid bottom line, with Morgan Stanley analysts saying they were still awaiting information on how Pennon plans to spend the £1.7bn in profit made from the sale of Viridor, its waste management business.

Among mid-caps, Royal Mail rose 6p to 303p after being awarded a multimillion-pound contract to deliver Covid home testing kits seven days a week, as ministers prepare to ramp up capacity in the coming weeks.

The award, part of Boris Johnson’s “Operation Moonshot”, marks a key victory for Royal Mail in its battle with Amazon to spearhead mass testing.

AO World, one of lockdown’s biggest winners, dropped 41.5p to 378p as investors took profits following a virus-induced sale surge for the white goods retailer.

Its share price has more than tripled so far this year.