The FTSE 100 dropped on Tuesday as investors rotated out of stocks amid rising tensions in the Middle East. Markets will also have one eye on tomorrow’s Federal Reserve interest rate decision and any shifts in the trajectory for US rates.
While investors showed signs of taking a ‘wait-and-see’ approach to the most recent Iran-Israel escalation yesterday, Tuesday brought a wave of selling that hit most FTSE 100 shares.
BP and Shell were among the few gainers with oil prices resuming their march higher.
“Markets briefly breathed a breath of optimism yesterday afternoon – but it didn’t last. As tensions between Israel and Iran flared again overnight, that momentary calm quickly gave way to renewed uncertainty,” explained Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Oil and gold prices, which had dipped on hopes of de-escalation, are climbing once more. President Trump’s urgent call for an immediate evacuation of Tehran jolted investors back into risk-off mode.”
In addition to developments in the Middle East, investors were contending with the very familiar concern about what Fed Chair Jerome Powell will say at his press conference following tomorrow’s interest rate decision.
Most FTSE 100 shares were trading negatively at the time of writing, with names such IAG and Legal & General among the worst hit. The selling was relatively contained suggesting a mild trimming of positions as opposed to panic selling.
Legal & General shares dropped 1.4% after the group issued targets for its asset management business.
Ashtead shares fell despite releasing a very respectable set of results. For all the concerns about tariffs and the impact on the US economy, plant hire company Ashtead is showing signs of revenue stabilisation, and EBITDA actually increased in the quarter ended 30th April.
“Ashtead has always been an interesting way for UK investors to get exposure to US economic growth, and it has certainly delivered impressive returns over the last decade,” said Chris Beauchamp, Chief Market Analyst at IG.
“After nearly halving from last December’s highs the shares seem to have found their footing, and while a US recession remains the major risk to the growth story there is still a lot to like in this morning’s numbers.”
The minor drop in Ashtead shares is likely the result of wider market concerns, rather than any issues with their update.