The FTSE 100 was broadly flat on Wednesday with stocks barely reacting to the latest efforts in the Middle East to reopen the Strait of Hormuz.
London’s leading index was down 6 points at the time of writing after bouncing around in a 30-point range for most of the session.
“Markets have adopted a similar pattern over the last six months as investors have responded to the latest mood music from the Middle East,” said AJ Bell investment director Russ Mould.
“Discussions between Iran and Oman over the establishment of a temporary corridor through the Strait of Hormuz, US sanctions on Tehran which were less strict than expected, and hints at continuing diplomatic efforts have helped bring Brent crude oil down to $86 per barrel.
“This has helped take the edge off market fears about inflation and brought government bond yields down. The improving picture helped fuel a recovery in Asian stocks and saw a steady open in Europe, with the FTSE 100 back within sight of the all-time highs achieved at the end of last month.”
A step down in fears of inflation helped housebuilders higher on Wednesday. The sector has become the FTSE 100 proxy for inflation fears, and news that oil could start flowing from the Strait of Hormuz helped their case, with Persimmon rising 1.7%. Barratt’s added 1.2%.
Miners were the best performers of the session. Fresnillo was the FTSE 100’s top riser as precious metals prices rose again. Antofagasta enjoyed an ongoing bid in oil prices.
Lower oil prices hit BP and Shell, acting as a counterweight to the positivity in miners and housebuilders. BP lost 2,2%.
The Middle East is likley to take a back seat over the coming days with a number of events in the US set to dominate trade.
‘The immediate macro test is July PCE inflation, the Fed’s preferred price gauge,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
“After softer CPI and recent weakness in employment, another moderation in inflation would strengthen the argument that the Fed can remain on hold rather than tighten again. A hotter print would be more disruptive, potentially pushing yields and the dollar higher just as equities are trading close to record levels.
“The data also sets the stage for Kevin Warsh’s Jackson Hole address on Friday, where markets will be looking for greater clarity on how the new Fed Chair intends to balance persistent inflation against softer growth.’