The FTSE 100 was lower on Friday after the US President said that he was in no rush to end the war with Iran, sending oil prices higher and stocks lower.
While it’s difficult to know whether he actually means he’s in no rush or if it’s just another negotiating tactic, we do know that markets are growing tired of Trump’s posturing, and fears are mounting that the impasse in the Middle East could lead to a global recession.
This was reflected in a Brent oil price of around $105 and an FTSE 100 trading below 10,400 at 10,387 at the time of writing.
Susannah Streeter, chief investment strategist, Wealth Club, said: “Brent crude is up around 20% on the week and is trading around the hot level of $105 a barrel, as any hopes of an immediate easing of the crisis are shattered.
“President Trump has stressed he’s in no rush to end the war, and with the ceasefire extended for another three weeks, there’s set to be fresh financial pain ahead as key shipments from the region remain blocked. That is set to keep costs elevated for a vast array of commodities, from oil and gas to fertiliser and helium, which are vital for electronics manufacturing.”
If the uncertainty in the Middle East wasn’t enough to unnerve investors on Friday, a Bank of England official has weighed in, labelling global equity markets overvalued.
“An official from the Bank of England has warned of a potential global stock market correction,” says Russ Mould, investment director at AJ Bell.
“Deputy governor for financial stability Sarah Breeden told the BBC that current share prices didn’t reflect economic pressures facing the markets.”
FTSE 100 Movers
Mondi was the FTSE 100’s top faller on Friday after the paper and packaging maker warned of rising prices due to the war in Iran, adding to a string of London-listed companies signalling a negative impact from the conflict.
“There’s no papering over the cracks in packaging outfit Mondi’s latest update. The business is heavily exposed to rising energy and raw materials costs and that’s putting significant pressure on profit, Russ Mould said.
“Mondi is increasing its prices but cannot pass on costs overnight so investors won’t see evidence of this until later in the year.”
Mondi shares were down nearly 8% on Friday.
At the other end of the leaderboard, British American Tobacco was the FTSE 100’s top riser after analysts at Morgan Stanley upgraded the stock to ‘overweight’ from ‘underweight’. BATS shares rose 3%.
JD Sports has had a tough week, made worse by rising oil prices on Friday, which sent the stock down 3% to near its worst levels since the beginning of the Middle East conflict.
BP and Shell helped provide some balance to the index with gains of around 1%, but this wasn’t enough to offset weakness in mining companies such as Antofagasta and Anglo American that were among the many cyclical stocks that dragged the FTSE 100 lower on Friday.