I’ve just received a note from Michael Hewson at CMC markets, summing up the day’s market activity. In it he says:
BP is up on the news that the Macondo Well in the Gulf of Mexico has finally been sealed thus hoping that another line can be drawn under this long running saga.
Instead, the market seems to be, in my favourite recent Martin Wolf phrase, “screaming its lack of concern” about BP’s good news.
This has come as a surprise to some analysts. Dougie Youngson at Arbuthnot tells me:
I expected to see a 5,6, even 10 per cent rise on the back of this news.
But in his note this morning, Youngson also said:
We feel that the market will respond favourably to yesterday’s news. However, this is not the end and represents the start of resolving the situation. Significant question marks overhang the company and until we have clarity on the outcome independent inquiry, we continue with our Sell recommendation.
Sylvia Pfeifer sums up some of those question marks in the post below.
More importantly for traders, it seems they believed BP’s earlier reassurances that the well was all but sealed. As Lucy Hoskins, an analyst at BarCap, tells me:
Most people thought the well was dead some way back. BP was very explicit that no more oil was flowing, so this was seen as a formality rather than anything more significant.
The good news for BP is that analysts have faith in its latest pronouncements about the spill. The bad news is the shares remain 37 per cent below their April peak.