Must read: Shell, BP, Tesla, UK house prices

GLOBAL MARKETS

A mixed European open has seen the German DAX drift higher while the FTSE 100 is under pressure after a disappointing update from Shell (LSE:SHEL) pushed its share price, along with that of rival BP (LSE:BP.), to the bottom of the UK basket. It was a weak session overnight in Asia with the Nikkei shedding over 0.5%.

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The US dollar is languishing near four-year lows against the euro while US equity futures are pointing to a weaker session on Wall Street as tariff jitters take the wind out of the market’s sails. Overnight Donald Trump threatened another 10% tariff on nations that align with the BRICS alliance as tensions appeared to re-escalate.

Sentiment swiftly reversed course over the long weekend. Last week, June’s US jobs report topped expectations lifting the S&P 500 to a new record – it has now overtaken Europe’s STOXX 600 in terms of performance so far this year.

UK HALIFAX HOUSE PRICE INDEX

The UK Halifax monthly house price index was unchanged in June with growth of 0%, up from a drop of 0.3% in May. The annual growth rate slowed slightly to 2.5% down 0.1 percentage points versus the previous month. The average property price now stands at £296,665, roughly unchanged compared to May.  

These figures point to weakness in the housing market that was echoed by similar data from Nationwide out last week. Nationwide came out with a more dismal assessment, suggesting that UK house prices fell by the most since February 2023 on a monthly basis in June.

While a single monthly figure may not tell the full story, a combination of push and pull factors are affecting the residential property market. On the negative side, the market has been contending with a fallout from higher stamp duty since April when the government removed temporary cuts to the tax in England and Northern Ireland.

But on the positive side, the post April dip is likely to fizzle out particularly in the second half. Plus, mortgage lending is improving, thanks to four rate cuts from the Bank of England over the last year and two more priced in this year. UK wages are also rising, the market’s regulatory conditions are improving, and buyer demand is up versus the previous year.

OIL/SHELL

OPEC+ has announced plans to increase its oil output further, boosting production by 548,000 barrels per day from next month as it looks to regain market share. This is a significant jump versus its monthly increases in the previous three months of 411,000. OPEC+ argues that lower oil inventories and a steady global economy justify increasing oil production but a grab for greater market share appears to be its main motivation. Since 2022, OPEC+ has been limiting supply to underpin prices but this year it has reversed course.

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It has been a volatile period for oil prices following the recent attacks on Iran by Israel and the United States. OPEC+’s announcement over the weekend is putting downward pressure on Brent crude and WTI, which are trading at around $68.25 and $66.5 per barrel respectively. The prospect of higher supply is likely to continue to keep a lid on prices. There are concerns about a supply surplus which could push prices even lower, particularly if global demand weakens on top.  

Caught up in the oil market frenzy this year is Shell. In this morning’s update, Shell has reduced the top end of its guided range for integrated gas and LNG production, and it said LNG trading would be down in Q2 versus Q1. Shares in Shell are suffering this morning, slumping to the bottom of the FTSE 100 as investors price in a weaker-than-expected set of quarterly earnings on 31 July.

Aside from the Middle East tensions and the unpredictability of OPEC+, Shell has also been grabbing the headlines over speculation that it could acquire its trailing rival BP. However, it was quick to deny takeover talks last month. While both oil majors have struggled over the last year, Shell has nursed much smaller losses – it is down around 10% versus BP which is down over 20% which has fuelled the M&A speculation.

TESLA

Tesla’s CEO Elon Musk announced on X this weekend that he’s launching a new political party after his involvement in the White House and bromance with US President Donald Trump collapsed in an embarrassingly public way. Now Musk is looking to influence events in Washington again, this time without Trump’s support. While he cannot run for president since he was born outside the US, Musk is still looking to shake up the longstanding two-party system. Meanwhile, as the feud continues, Trump responded by calling the new political party “ridiculous”, describing Musk as “off the rails” and a “train wreck”.

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Much to the dismay of Tesla Inc (NASDAQ:TSLA)’s shareholders, after a brief political hiatus, it looks like Musk is renewing his focus on Washington once again, meaning he’ll have less time to spend on the electric vehicle giant. There is a distant idea that Musk garnering great political influence could mean a bounce-back in interest in the green energy transition and a boost to green subsidies which would help Tesla. However, the more realistic, shorter-term likelihood is that Musk’s political shift is negative for Tesla since it comes at a time when the company’s performance is lagging, which necessitates a more hands-on approach from its boss.

It looks like shares in Tesla will open lower today on Wall Street, with its Frankfurt-listed shares in the red this morning. The stock is already down around 17% this year, sharply underperforming most mega-cap tech names and the wider US stock market. Its latest figures revealed that Tesla is struggling amid Musk’s political focus and increased competition from electric vehicle rivals. The company suffered a 13.5% drop in quarterly deliveries in April to June, falling short of Wall Street’s estimates. It looks like there’s a long, bumpy, uphill drive ahead for Tesla.