The FTSE 100 bounced around the 10,700 mark on Wednesday as investors digested Donald Trump’s address at the UN General Assembly yesterday and the implications for oil and inflation.
Although headlines were dominated by threats to annihilate Iran, the two countries reportedly met on the sidelines, providing hopes of an agreement that could see the Strait of Hormuz reopen.
“Oil’s slow but steady retreat below $100 has been welcomed by investors, helping to give European equity markets a lift,” said Dan Coatsworth, head of markets at AJ Bell.
“Oil resuming a downward trend is the market’s way of saying it is slowly starting to believe that energy supplies will flow again, and that there is a potential resolution to the conflict in the Middle East. It’s too early to see any radical changes to interest rate expectations, but investors will be hoping central banks soon have fewer reasons to raise the cost of borrowing by a significant amount.”
Markets seemed to have looked past Trump’s threat and are focusing on the potential for a deal, with both sides being economically impacted by the ongoing conflict.
“In true Trump style, the US President has again toyed with the world, claiming he’s in two minds about whether to launch another big strike to annihilate Iran or push for further negotiations,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“Despite the threats being dangled, the TACO trade is in play to some extent, with markets expecting some kind of deal to be more likely, especially after Trump described talks with Iranian officials as ‘very productive’.”
The FTSE 100 started the session on the front foot, rising to 10,762 before easing back to trade at 10,720 at the time of writing.
Rentokil Initial was the FTSE 100’s top riser, up 2.3%, after analysts at Investec raised their rating to ‘buy’ from ‘hold’ with a price target of 400p. Shares were trading at 325p.
Gains for heavyweights BP, Shell, HSBC and Rolls-Royce helped keep the index afloat, offsetting weakness elsewhere.
JD Sports was among the losers after reporting a 20% drop in profits but maintained guidance for the year. Shares were down 3.1%.
“JD Sports’ woes are not a surprise, as it reported sluggish growth, contracting margins and a tough consumer backdrop in its latest update. The company says it has turned in a ‘resilient’ performance, which is a fair observation given that sales have been flat rather than a big collapse,” Dan Coatsworth said.
“While business is tough now, it might not always be this way. JD has its eyes on the future, hence why it has strengthened e-commerce capabilities, reorganised part of its store portfolio, and embraced AI to help capture new ways of using the technology to research and buy goods. Geographic expansion into Mexico via a franchise partnership also shows a forward-thinking mindset.”
Autotrader was the FTSE 100’s top faller with losses of 3.4% as the car sales platform fell to the lowest levels since June.