The FTSE 100 slipped on Thursday after Donald Trump dashed hopes of a near-term end to the war in the Middle East overnight.
Those who were hoping Donald Trump’s speech last night would be the beginning of the end of the war were left disappointed. Instead, the US President used his 20-minute address to regurgitate threats he’d recently made on social media and did not mention a ceasefire once.
Market expectations were high going into Trump’s speech, with oil lower and stocks surging in the US session yesterday. This was turned on its head after Trump wrapped up his unwelcome, but not unsurprising, instalment.
“Global markets took a step backwards overnight after Donald Trump’s live address, with the mood shifting sharply from the cautious optimism that had been building in recent days,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“From a market perspective at least, the speech appeared to have the opposite effect investors were hoping for, with oil pushing higher, bond yields climbing, and equity markets falling back.”
Although Trump’s speech wasn’t what markets had hoped for, there is a clear sense that the US President is aware of how US military actions in Iran are affecting global markets and is ready to change his approach before too much damage is done to the economy or the stock market.
This belief was evident in the FTSE 100’s reversal in early trading, with the index rebounding from lows around 10,290 to 10,324 at the time of writing.
With Brent and WTI oil rallying 7.6% and 6.9% respectively, BP and Shell were back in favour, and the oil majors did a lot of the heavy lifting for the bulls on Thursday.
BP rose 4% while Shell added 3%. But selling elsewhere was too much to get the index back into positive territory.
Weakness in gold and silver knocked Fresnillo and Endeavour Mining lower. Silver-focused miner Fresnillo lost 5% and was the FTSE 100’s top faller.
Higher oil prices also reignited fears of an interest rate hike and fed through into the FTSE 100 housebuilders, which were mostly lower. Barratt Redrow lost 4% as it changed hands near its worst point since the war began. Persimmon was down 2%.
Lloyds shares were marginally weaker after the bank confirmed it wouldn’t have to set aside more cash for the motor finance scandal which should draw a line under the matter from investors’ perspectives.
“There will be some relief that Lloyds is not being forced to change its provisions, at least for the time being, in the wake of the redress scheme for the motor finance mis-selling scandal being announced,” said AJ Bell investment director Russ Mould.
“Details had shifted slightly from previous indications on average levels of compensation, but it seems Lloyds had been conservative enough in its assumptions to absorb this.
“Lloyds shares were lower this morning but the fall was similar to that seen for its peers amid broader market weakness relating to Iran.”
Lloyds shares were down 1% at the time of writing.