The FTSE 100 surged on Wednesday as traders cheered apparent progress toward ending the Middle East conflict.
Global equities reacted positively to a series of comments by US officials that signalled a de-escalation in tensions between the US and Iran. Marco Rubio said that the offensive stage of the conflict was over, while Trump’s comments suggested he was confident a deal with Iran could be struck.
The FTSE 100 was trading 2.2% higher at the time of writing.
Today’s move shows just how sensitive equity markets still are to developments in the Middle East. And how desperately traders want to see a deal between the US and Iran.
“The market is celebrating an apparent late-night TACO Tuesday as the US pauses its plan to escort commercial ships through the Strait of Hormuz to focus on negotiations with Tehran,” said AJ Bell investment director Russ Mould.
“A ceasefire which seemed to have been stretched to breaking point appears to be just about holding up. Hopes for de-escalation have been renewed by the latest developments as Donald Trump declares ‘Project Freedom’ to be done and dusted.
“A rally for stocks and bonds has taken hold and oil prices have eased back from yesterday’s highs. However, oil is still comfortably in the $100-plus per barrel territory, which is worrying for inflation.”
But these worries had taken a back seat on Wednesday with 90 of the FTSE 100’s constituents trading in positive territory at the time of writing.
Fresnillo was the FTSE 100’s top riser as precious metals gold and silver rallied on overnight developments. Fresnillo surged 9%, but was still way below recent highs.
Rolls-Royce was 8% higher as the engine maker reacted positively to talks of a ceasefire. There were also gains for IAG, which shared the same sentiment.
The risk-on trade helped mining stocks higher, with Antofagasta jumping 8% and Anglo American climbing 7%. Housebuilders joined the party, with Persimmon and Barratt Redrow both adding around 5%.
Diageo issued quarterly performance data on Wednesday showing the group was still struggling with its North American business, where sales fell again. But it was a slightly better picture for the rest of the world with strength in LAC and Africa. Investors seem to think Diageo are turning a corner and shares rose 4% on Wednesday.
“Diageo’s Q3 trading update this morning shows tentative signs of stabilisation after a bumpy period, but the group is not out of the woods yet,” said Adam Vettese, market analyst for eToro.
“Organic net sales edged 0.3% higher in the quarter, a welcome improvement on the H1 decline. This was down to strong double-digit growth across Europe, Latin America & Caribbean and Africa, helped by Easter timing and World Cup stocking.”