Matt Britzman, senior equity analyst, Hargreaves Lansdown, shares a market report, as markets cheer fresh Iran deal hopes, while SpaceX demand faces market test.
FTSE 100 futures are pointing to a strong open this morning, following a sharp rally on Wall Street last night and overnight gains across Asia, as investors latch on to signs that the conflict with Iran may yet be pulled back from the brink.
The catalyst was President Trump pressing pause on planned strikes and suggesting a deal could be signed as early as this weekend, giving markets another reason to lean into risk after a tense few sessions. It has the feel of a classic “escalate to de-escalate” playbook. Still, with the US mid-term elections approaching and the economic stakes rising globally, there is a clear incentive on all sides to find a quick resolution.
Oil prices have eased back into the mid-$80s per barrel, their lowest levels in two months, as hopes of a diplomatic breakthrough take some of the immediate risk premium out of the market. But even if a deal is reached, getting supply back to normal will not be as simple as flicking a switch, with mines in the Strait of Hormuz to clear, idled production fields to restart, and damaged energy infrastructure to repair. That means oil markets may be breathing a little easier, but the path back to smoother flows could take us into the latter part of the year.
SpaceX’s long-awaited IPO is set to be one of the biggest moments for markets today, with reports suggesting the offer is around four times oversubscribed. The real test comes once trading begins, because strong demand for an allocation does not always translate into the same willingness to buy in the open market, and long-term returns will still come down to the familiar mix of business quality, fundamentals and valuation.
UK investors should also remember that US IPOs usually go through an opening auction at the start of the session, which can last a few hours, so SpaceX is unlikely to be available to trade straight out of the blocks.
UK GDP data added a softer tone beneath the market rally, with the economy shrinking 0.1% in April and showing the first real signs that the strong start to the year is beginning to crack. Services took most of the strain, with households cutting back on non-energy spending and activity falling across more than half of the major sub-sectors, while the boost from stockpiling in manufacturing looks unlikely to last.
The figures leave the economy on course for a much weaker second quarter, and while inflation risks have not disappeared, the loss of momentum makes it easier to argue that the Bank of England will keep rates on hold.
