The FTSE 100 made strong progress on Tuesday as oil fell further amid growing confidence in the US-Iran peace process.
The FTSE 100 closed up 63.59 points, 0.6%, at 10,494.21. The FTSE 250 ended down 36.04 points, 0.2%, at 23,326.58, while the Aim All-Share fell 1.36 points, 0.2%, to 803.93.
Blue-chips took their lead from continued hopes of an end to the war in the Middle East. US President Donald Trump said the Strait of Hormuz would “completely open” once Washington DC and Iran sign their peace agreement on Friday in Switzerland. Iranian media reported that three oil tankers and two cargo ships had already passed through.
“Although the deal has not been formally signed, there already appears to be a peace dividend for markets,” said Kathleen Brooks, research director at trading group XTB. “We are seeing European markets catch up with the US, and this could continue, as some European indices remain below their pre-war levels”, including London’s FTSE 100 index, she added.
Brent crude for August delivery traded lower at 79.95 dollars a barrel on Tuesday, down from 83.18 dollars at the time of the equities close in London on Monday.
In European equity markets on Tuesday, the Cac 40 in Paris ended up 0.8%, and the Dax 40 in Frankfurt edged 0.1% higher. In New York, the Dow Jones Industrial Average was up 0.7%, the S&P 500 was 1.7% higher, but the Nasdaq Composite eased 0.3%.
SpaceX remained in favour after its IPO, soaring a further 9.8%, as it announced the 60 billion dollar acquisition of AI developer Anysphere, which trades as Cursor.
Meanwhile, US Federal Reserve chairman Kevin Warsh kicked off his first meeting in charge of the central bank’s rate-setting committee on Tuesday, with policymakers expected to keep rates steady. Fed officials are set to keep rates at a range between 3.50% and 3.75%, extending their pause on cuts since the start of the year. The decision will be announced on Wednesday after the two-day meeting.
They will also release their quarterly Summary of Economic Projections, which includes guidance on growth, inflation and interest-rate expectations. Analysts expect the Federal Reserve to remove the easing bias from its statement, while Mr Warsh’s first press conference will be watched closely as the market looks for hints at the direction of interest rates.
Bank of America thinks the new Fed chairman will “likely lean dovish” in the conference, arguing that supply shocks are one-offs, that the Fed should be forward-looking on AI disinflation, and that trimmed-mean PCE and wage inflation do not appear problematic. But JPMorgan thinks the meeting will feature “more continuity than regime change”.
The euro traded little changed against the greenback, at 1.1603 dollars on Tuesday against 1.1604 dollars on Monday. Against the yen, the dollar was trading at 160.46 yen, higher from 160.14 yen on Monday.
Weakness in the Japanese currency came despite the Bank of Japan’s expected quarter-point interest rate hike to 1.0% at its June meeting. Amova Asset Management’s chief global strategist and chief economist Naomi Fink said the hike was “well-signalled and priced into the market beforehand”.
Looking ahead, the BoJ said it will “continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions”. It will continue “closely monitoring” the impact of the Middle East on Japan’s economic activity and prices and examine the “likelihood of realising the baseline scenario of the outlook for economic activity and prices and the risks to the outlook”.
ING thinks the timing of the next hike will depend heavily on the situation in the Middle East. “The possibility of an October hike increases if a long-term peace deal is made soon,” ING said. “The debates between the hawks and doves are expected to continue in the coming months, and the pace of rate hikes should be only gradual,” it said. “We’re keeping our base case for the December hike, as the situation in the Middle East remains fluid,” ING added.
The pound traded at 1.3422 dollars on Tuesday afternoon, down from 1.3436 dollars on Monday. Against the euro, sterling ebbed to 1.1567 euro from 1.1580 euro on Monday.
The yield on the US 10-year Treasury eased to 4.45% on Tuesday from 4.47% on Monday. The yield on the US 30-year Treasury narrowed to 4.95% from 4.96% on Monday.
Gold traded at 4,323.46 dollars an ounce on Tuesday, lower from 4,354.54 dollars on Monday.
In London, improved confidence about economic prospects lifted banks NatWest, HSBC and Barclays by 2.2%, 1.8% and 1.5% respectively. Housebuilders also rallied, with Barratt Redrow up 1.8% and Persimmon up 2.5%. Rolls-Royce added a further 2.6% after its Swedish small nuclear reactor contract win on Monday.
On the FTSE 250, Currys jumped 4.2% as RBC Capital Markets upgraded to “outperform” from “sector perform”. The broker said the London-based electronics retailer is transitioning from being a recovery play to a likely multi-year compounder with strong cash returns. Its strong relative position should allow for further share gains and growth in higher margin services and adjacent categories, in the broker’s opinion.
But Rathbones plunged 17% after reporting a series of moves that will hit profit by £60 million and halt new inflows from some clients. The firm said it has voluntarily halted new inflows from some existing high-risk clients until they “meet certain requirements”. The London-based investment and wealth manager outlined the moves after a skilled person review, which followed engagement with the UK Financial Conduct Authority. It expects a £60 million profit hit over the next two years. “The review has identified areas for improvement within the group’s UK Wealth Management business regarding the implementation and embedding of consumer duty, as well as certain aspects of its compliance, oversight and assurance arrangements,” Rathbones said.
The biggest risers on the FTSE 100 were Endeavour Mining, up 117.0p at 4,223.0p, Rolls-Royce, up 34.6p at 1,393.0p, Scottish Mortgage Investment Trust, up 36.0p at 1,486.0p, Persimmon, up 26.0p at 1,078.5p and Convatec, up 5.0p at 209.0p.
The biggest fallers on the FTSE 100 were BT Group, down 5.45p at 197.05p, Associated British Foods, down 32.5p at 1,894.0p, Antofagasta, down 59.0p at 4,231.0p, Relx, down 32.0p at 2,420.0p and Marks & Spencer, down 3.2p at 372.2p.
Wednesday’s global economic calendar has UK and eurozone inflation figures, US retail sales data and the interest rate decision by the US Federal Reserve. Wednesday’s local corporate calendar has full-year results from AO World and a trading statement from PZ Cussons.
