The FTSE 100 ticked higher on Friday as investors took stock of a dramatic week for geopolitics that has culminated in a fragile ceasefire in the Middle East.
There was a sense of calm to trading on Friday morning that hadn’t been felt since before the US and Israel launched attacks on Iran 28th February.
With talks ongoing and missile strikes in Lebanon overnight, stocks aren’t completely out of the woods, but investors should be encouraged by the FTSE 100’s near 1,000-point rally from March intraday lows to this week’s intraday high.
London’s leading index ticked gently higher past the 10,600 mark on Friday but showed little sign of the exuberance experienced earlier in the week.
The measured session for European stocks followed a rally on Wall Street overnight, sparked by reports that Israel and Lebanon were preparing for talks to end attacks on the country.
But this failed to translate to any meaningful upside for European stocks after both sides launched strikes at each other overnight.
Nonetheless, the overall direction of travel in the conflict will help boost sentiment, with the worst of it now seemingly in the past as all sides signal a willingness to sit down and thrash out a deal.
“While the term ‘ceasefire’ is used somewhat loosely, there has been enough perceived de-escalation in the Middle East to ease some of the pressure on risk assets we saw earlier in the week,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“The prospect of in-person talks between the US and Iran over the weekend is also helping steady nerves, offering hope that diplomatic channels remain open. Taken together, investors are becoming more comfortable that, while risks remain, the broader trajectory is moving in the right direction.”
Although a deal will be bullish for risk assets, equity markets have been quick to price in a resolution to the conflict that may seem a touch premature if oil prices remain at current levels. Brent was trading at $97.06 on Friday, a level that still risks stoking inflation as we enter the summer.
Michael Brown, Senior Research Strategist at Pepperstone, said: “if an Israel-Lebanon ceasefire can be agreed, that is in turn likely to increase the chances of a US-Iran deal being struck, thus raising the likelihood of a swifter normalisation of commodity flows through the Strait of Hormuz.”
There were very few movers of more than 2% at the time of writing on Friday, and most stocks were changed by less than 1%.
ConvaTec rose 3.5% to be the session’s best performer following a capital markets day yesterday in which the firm set out plans to accelerate
Compass Group was the FTSE 100’s top faller, losing another 2.6% on Friday.