Here’s why BP, Shell, Royal Mail and Centrica shares are moving sharply today

Stock markets are volatile right now and some of the UK’s biggest names are registering significant swings. Our City expert explains why.

Big swings for BP (LSE:BP.) and Shell (LSE:SHEL) and a further rally by Royal Mail (LSE:RMG) on a day of outperformance for the FTSE 250 index meant there was no post-holiday lull for investors today.

The volatility was driven by sharp moves in the price of oil and the continued fall-out from Federal Reserve chairman Jerome Powell’s hawkish speech to the Jackson Hole symposium, in which he warned of the need for a “restrictive policy stance” for some time.

BP and Shell had been 2% higher after Brent crude surged to $105 a barrel on Monday, reflecting worries that Opec and its allies might be preparing a cut to output.

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But shares and the Brent price fell back as the focus on tighter supply conditions quickly gave way to fears over how higher interest rates will push economies closer to recession. The mood wasn’t helped by more Chinese cities tightening curbs in response to Covid outbreaks.

Elsewhere in the commodity space, the copper price fell 2% to $3.54 a pound compared with the economic bellwether’s two-month high recorded last week. Heavy fallers included Chilean miner Antofagasta (LSE:ANTO) and trading giant Glencore (LSE:GLEN), while Africa-focused Endeavour Mining (LSE:EDV) lost 104p to 1678p during a disappointing session for the sector.

SSE (LSE:SSE) and Centrica (LSE:CNA) joined in the sell-off amid a drop in European natural gas prices as the FTSE 100 surrendered an initial 0.6% gain to reach lunchtime just 8.77 points higher at 7436.08.

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Financial stocks helped to prop up the top flight as bets on interest rate hikes by the Federal Reserve, Bank of England and European Central Bank (ECB) boosted the margin outlook. Barclays (LSE:BARC) shares lifted 5.8p to 167.9p and Standard Chartered (LSE:STAN) by 20.8p to 610.4p.

Deutsche Bank now expects half point hikes at the three remaining meetings of the ECB this year, bringing the deposit rate up to 1.5% in December before a slowing in the hiking pace.

Futures pricing for the Federal Reserve’s meeting in December spiked following Powell’s speech to 3.7%, causing the US two-year yield to reach its highest intraday level since November 2007 at 3.48%.

The higher yields put pressure on US tech stocks, with the FANG+ index of New York’s most-popular growth stocks down 1% yesterday on top of Friday’s 4% decline.

The US jobs report for August on Friday could go a long way to determining whether the Fed moves by 0.5% or 0.75% at its September meeting. Deutsche Bank’s economists expect that there’ll be another 300,000 increase in non-farm payrolls, which would leave the unemployment rate unchanged at 3.5% and keep a 0.75% rates rise on the table.

The US rates outlook has weakened the pound to $1.17, its lowest level since March 2020 and providing support for the large number of overseas earning stocks in the FTSE 100 index.

Despite the weaker UK outlook, investors today focused their buying on the FTSE 250 index after the second-tier benchmark improved 150.22 points to 19,319.94.

Some heavily sold stocks were in demand, not least Royal Mail (LSE:RMG) as the delivery firm jumped another 13.3p to 280.3p. The shares had been near a two-year low of around 262p prior to Thursday’s disclosure that business secretary Kwasi Kwarteng ‘reasonably suspects’ Daniel Kretinsky’s Vesa Equity Investment intends to increase its 22% stake.

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Kretinsky’s interest, which is likely to be focused on Royal Mail’s profitable European parcel delivery operation GLS, has shifted the spotlight from a fortnight of strike action that will leave the UK delivery business “materially loss making” in 2022-23.

Other FTSE 250 stocks on the recovery trail included electricals retailer Currys (LSE:CURY), which lifted 2.55p to 63.55p on speculation that Tory leadership favourite Liz Truss is considering a VAT cut. Dr. Martens (LSE:DOCS) also gained 11.6p to 247.2p and online fashion retailer ASOS (LSE:ASC) rallied 30.5p to 727.5p as investors also eyed the potential upside to Barclays’ new 920p price target.

Harbour Energy (LSE:HBR) was one of the leading FTSE 250 fallers, even though analysts at Jefferies raised their price target by 22% to 600p. They said improved production guidance in last week’s results built confidence in the North Sea firm’s investment case, accompanied by the prospect of further material increases in shareholder distributions.