Global stocks surged higher on Wednesday as investors reacted to signals from Donald Trump that the war in the Middle East would end.
Trump has given a 2-3 week timeline for ceasing military operations in Iran. As we all know, anything the US President says should be taken with a tanker of salt, but his assertion that he doesn’t need a deal with Iran to end the war makes his timeline more realistic than it otherwise might have been.
The prospect of an end to constant missile strikes and even the reopening of the Strait of Hormuz sparked a risk-on rally on stocks, aided by Brent falling below $100.
The FTSE 100 was trading 1.5% higher at 10,344 at the time of writing.
“There’s been a roar of recovery on equity markets as investors cling to high hopes of an end to the war with Iran in weeks,” said Susannah Streeter, chief investment strategist, Wealth Club.
“President Trump is blinking furiously faced with painfully high energy costs, which risk derailing Republicans’ chances at the midterm elections, and is signalling a rapid wrap-up to the conflict.”
The major story for equity bulls is that an end to the war reduces the likelihood of sentiment-killing interest rate hikes by major central banks.
You would have expected the FTSE 100’s housebuilders to surge on today’s news, but the sector faced unwanted news from Berkeley Group Holdings, which has warned of the impact of the war on trading.
“Berkeley has a longstanding reputation for being adroit at calling the ups and downs of the property market, particularly under the leadership of its late founder Tony Pidgley,” said AJ Bell investment director Russ Mould.
“In that context, the moves the company has announced today will make others sit up and take notice.
“New land acquisitions are on hold. Berkeley plans to prioritise profitability and maintaining balance sheet strength as it looks to navigate what it clearly expects to be a difficult period for the industry.”
Berkeley Group shares were down 16% at the time of writing.
Copper miner Antofagasta was back at the top of the FTSE 100 index as the group again proved itself as one of London’s leading risk-on proxies. Anglo American also rose on Wednesday, adding 5%.
Rolls-Royce shares joined the party on Wednesday, gaining around 6% on hopes that disruption to air travel would continue to fall. This sentiment was also felt by IAG, whose shares added 5%.
Banks were higher, as were most of the FTSE 100’s financial contingent.
Oil prices falling below $100 are good for almost everybody, apart from those involved in extracting, refining, and trading it. Signs that the war was near a conclusion made the recent rallies in BP and Shell look vulnerable, and the pair fell on Wednesday. Shell was down 3%.