The combination of a drop in oil and concerns about the upcoming Jackson Hole summit saw the FTSE 100 fall with global equities, although selling in London was more subdued than in US and European markets.
Reports over the weekend suggest that Iran and the US were getting close to a renewed version of the Joint Comprehensive Plan of Action (JCPOA), which could potentially see Iran scale back its nuclear programme and the west lift sanctions on exports from the country, including oil.
According to Al Jazeera, sources close to the matter said Iran would be permitted to export 50 million bpd within 120 days of signing the renewed agreement.
The price of Brent Crude slid in afternoon trading and saw the FTSE 100’s oil companies reverse early gains.
Jackson Hole
Meanwhile, markets eyed the upcoming Jackson Hole summit and US Federal Reserve chairman Jerome Powell’s latest views on the economy and interest rates.
“The Jackson Hole summit of central bankers and finance ministers is widely expected to see US Federal Reserve chair Jerome Powell take to the floor and puncture optimism which has built up over hopes the Fed may be nearing the point at which it pivots away from rate hikes,” said AJ Bell investment director Russ Mould.
“The event coincides with the PCE (personal consumption expenditure) measure of inflation, which the Fed often uses as a guide for its actions.”
“If this confirms the trend seen in the July CPI reading of a reduction in inflationary pressures then it might give investors some reason for renewed optimism.”
Markets across the Atlantic displayed pessimism, with the Dow Jones down 0.8% to 33,431 in pre-open trading, the S&P 500 falling 1% to 4,186.5 and the NASDAQ sliding 1.4% to 13,080.
Euro falls below parity with dollar
European markets saw the Euro take a blow, as the currency fell below parity against the dollar to hit a five-week low as concerns over a three-day pause on gas supplies across the continent later this month weighed on the markets as European electricity prices surged.
The dollar surged from strength to strength as the upcoming Jackson Hole summit sparked a five-week high on assumptions the Fed would hike interest rates higher to tackle US inflation.
EUR>/USD stood at 0.9993 at the time of writing.
The German DAX fell 1.7% to 13,311.7, the French CAC dropped 1.2% to 6,417.5 and the Italian FTSE MIB slid 1.3% to 22,221.4.