The FTSE 100 rose on Wednesday amid hopes the end of the Middle East conflict was in sight as Donald Trump talked up his efforts to secure a truce with Iran.
There was a definite risk-on tone to trading on Wednesday as oil prices retreated and the FTSE 100 moved over 1% higher.
Whether the peace talks proved fruitful seemed of little concern to traders on Wednesday, who were more than content with the attempt at dialogue. Iran is still downplaying reports of progress in talks.
The key driver of equity markets on Wednesday was Brent Crude oil falling back beneath the $100, a key psychological level for investors concerned about implications for inflation in the coming months.
Should oil continue to fall, investors will shift their attention to central banks and whether the foray above $100 has any meaningful impact on thinking around interest rate decisions, or whether central bankers choose to view any uptick in inflation as a blip. UK inflation data for February, released on Wednesday, was steady at 3%, but will have little impact on the BoE given it covered the period before the war started.
“European markets moved higher in early trading on Wednesday, despite conflicting messages about the Middle East crisis,” says Russ Mould, investment director at AJ Bell.
“The FTSE 100 moved back through the 10,000 level, led by banks and miners. Oil prices remained volatile as talk of a potential peace plan was offset by ongoing strikes in the Middle East and reports of the US sending more troops to the region.”
Precious metals miners were higher on the session as gold prices picked up. Gold has shown no signs of being a safe haven during the Middle East conflict and rallied with risk assets on Wednesday.
Endeavour Mining was the FTSE 100’s top riser, up 5%. Fresnillo added 3.8%
Housebuilders were back among the gainers after enjoying a double whammy of easing interest rate concerns and an upbeat trading update from Crest Nicholson.
Barratt Redrow rallied 3.5% as Persimmon gained 2.2%.
Amongst the fallers was a splattering of ‘safer’, more defensive stocks such as BT Group, Reckitt Benckiser, and Shell that won’t be as attractive if the equity market kicks on from here.