Market snapshot: Pearson takeover scrapped, oil price up again

There's bad news for Pearson shareholders who were banking on a big payday, but oil stocks are currently supporting the FTSE 100. Our head of markets analyses latest events in financial markets both here and overseas. 

Amid a lacklustre opening, the FTSE100 has crept into positive territory, with the oils and miners again doing most of the heavy lifting.

The element of caution is also being maintained with selective buying of defensive stocks, with the tobaccos and energy companies also edging higher as investors continue to hedge their bets.

Less positively, Apollo Global Management has confirmed that it will not be proceeding with an offer for Pearson (LSE:PSON), sending those shares lower by 11%, while broker downgrades also weighing on stocks including Lloyds Banking Group (LSE:LLOY) and Experian (LSE:EXPN).

Hopes of a speedy resolution to the Russia Ukraine conflict have been dashed again, with scepticism surrounding the latest reports of a slowdown of the Russian aggression. The oil price has therefore risen once more and now stands ahead by 45% in the year to date.

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Unfortunately, it remains too early to say what the longer term implications will be on global supply, since even if a ceasefire were to be declared, it is unclear whether the attitude of the West towards Russia has now been irrevocably tarnished. As such, further volatility can be expected until such time as the demand/supply imbalance reaches some sort of equilibrium.

This follows on from another generally positive session in the US, as investors continue to be drawn towards those sectors which have more recently borne the brunt of both deteriorating sentiment and an ongoing rotation between value and growth shares.

At the same time, warning lights from the bond markets have continued to flash, albeit temporarily for the time being. Another brief inversion of the Treasury yield curves suggested that investors remain uneasy as to whether the Federal Reserve can engineer a soft landing for the economy, as opposed to raising rates too aggressively and potentially inducing a recession to an otherwise recovering economy.

The major indices continue to claw back some of the large losses incurred this year, with the performance gap compared to the UK narrowing. Even so, the Dow Jones remains down by 2.9% in the year to date, the S&P500 by 2.8% and the Nasdaq by 6.6%.

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For its part, the FTSE100 is clinging on to tentative gains and is now ahead by a little over 2% in 2022, underpinned by its exposure to defensive and energy stocks, with the additional tailwind of some international institutional interest.

Quite apart from the idiosyncratic nature of an index which derives the majority of its earnings from overseas, the current average dividend yield of 3.3% is also proving of interest given the backdrop of a still historically low interest rate environment.