Trump slaps 30% tariffs on EU, Mexico
Hopes of a speedy resolution to the conflict between Israel and Iran were short-lived, with the barrage continuing between the two countries.
The FTSE 100 was no less fretful in opening exchanges, as a new wave of military attacks was reported in the Middle Eastern tensions. Some tentative strength in the oil majors was not enough to offset a broad markdown across other sectors including, but not limited to, the miners where the likes of Fresnillo (LON:FRES) and Endeavour Mining drifted despite a flat gold price.
International Consolidated Airlines was weaker at the open following the latest escalation and its potential impact on travel in the region, although the shares remain ahead by some 97% over the last year, dwarfing the 2% decline today.
Domestically, a business owner’s survey revealed that a third of UK companies were planning to cut jobs in response to higher National Insurance contributions, which plays into the current narrative of a softening labour market. More positively, some progress was made on the US and UK trade deal in regard to aerospace and car tariffs, although steel has seemingly yet to be decided.
The main indices both remain comfortably ahead so far this year amid the ongoing global turmoil, with gains of 8% and 3% for the FTSE 100 and FTSE 250 respectively, underscoring the UK’s improving reputation as an investment destination.
In the US, markets clawed back some of their losses from the end of last week, although across asset classes, investor sentiment is unsettled. The oil price spiked once more, although later pared back most of those gains, as calls to evacuate Tehran and the possibility of the closure of the Strait of Hormuz kept investors on alert.
The potentially temporary gains in the US futures at this early stage are pointing downwards once more – were driven by optimism that the conflict would remain contained, which in turn prompted investors to return to risk with growth stocks in focus. Each of the “Magnificent Seven” stocks advanced, with Meta Platforms (NASDAQ:META) receiving an additional boost by announcing that it would be introducing advertisements on WhatsApp, sending its shares almost 3% higher.
Even so, the possibility that the conflict could last some weeks until a resolution is found is likely to result in further knee-jerk reactions in either direction as new news emerges. Global markets have, for the most part, been resilient in the face of the news and remain near record highs in some cases, although the potential for upset is clearly on the radar.
In the meantime, a weaker-than-expected manufacturing survey came in ahead of the next Federal Reserve meeting, which begins today before the widely expected no-change decision tomorrow. In the year to date, the Dow Jones is all but flat with a decline of 0.1%, whereas the S&P 500 and Nasdaq remain above the waterline with gains of 2.6% and 2% respectively.
Asian markets were mixed overnight, with some relief coming to the Nikkei 225, which edged higher.
The Bank of Japan opted to keep interest rates unchanged as expected, while also easing its bond purchasing programme in a gradual move back to normalising monetary policy. However, the central bank is also mindful that economic growth is likely to weaken as consumer sentiment remains low, let alone any exogenous shocks, such as from the US, which could derail any trading recovery.