European shares opened slightly higher on Tuesday as oil prices continued to surge and investors digested hawkish comments from the US Federal Reserve chair Jerome Powell.
The pan-European STOXX 600 edged up 0.3% in early deals. The UK’s FTSE 100 index, which has a large number of oil majors on its list, was up 0.4%. Brent crude was down slightly at $114 a barrel as fears of supply disruption and a possible oil embargo on Russia hit sentiment.
Powell on Monday said the Fed must move “expeditiously” to raise rates and possibly “more aggressively” to battle soaring inflation, after the central bank lifted rates by 25 basis points only last week.
Hargreaves Lansdown analyst Susannah Streeter said the Fed was “caught between a rock and a hard place” on rates.
“The Federal Reserve sees little option but to try and chip away inflation with even bigger interest rate hikes this year, if price pressures keep mounting. And there are very few signs of much relief given that the only way has been up for the price of oil in recent days.”
“Brent Crude trekked upwards to over $118 dollars a barrel in early trade, before losing a little ground, and that was off the back of yesterday’s 7% rally.”
“A Russian crude embargo remains in the sights of a growing number of European leaders, at a time when Russian production is already expected to be dented due to slumping demand for the country’s exports around the world. China’s reluctance to prolong mass lockdowns is also seeing downward pressure on prices evaporating.”
In equity news, shares in Computer support and services provider Softcat rose 7% as the company said its full-year outturn was now expected to be ahead of previous estimates after interim profits grew ahead of expectations in the six months ended to January 31.
German construction software supplier Nemetschek surged 12% as the company reported a positive profits outlook.
