Stock markets are rallying as oil falls near $100 on hopes that the war in Iran could end soon.
Investors clutching at any sign of easing doubts were cheered by Donald Trump’s latest suggestion that the US could end the conflict within ‘two or three weeks’.
‘We’re going to leave soon,’ Trump told reporters at the White House on Tuesday, saying the exit could happen ‘in two weeks, maybe two weeks, maybe three.’
The president will provide an update on Iran in a speech to the nation this evening.
The FTSE 100 opened up 1.2 percent after Asian markets rallied overnight.
Brent crude fell overnight to $100 a barrel for the June contract, but remains well above pre-war levels.
It closed at the highest level since the start of the war at $118.35 on Tuesday, the last day of the May delivery contracts.
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The Iran war is heavy on production as costs rise
Manufacturers saw a sharp rise in costs in March as the war in Iran stalled the industry’s recovery.
Production contracted for the first time in six months in March, as the war disrupted supply chains.
The monthly PMI index came in at 51 last month, up from 51.7 in February, which read above 50-point growth.
However, the manufacturing index PMI data fell to 49.2, from 52.5, and the first reading below 50 since last September.
Production and employment at manufacturers across the board contracted in March, while overall prices rose at the fastest pace since October 2022, reflecting rising energy costs.
The seasonally adjusted Consumer Price Index – which measures the price of goods and fuel – rose 15 points on a monthly basis, the biggest gain since the month following Black Wednesday in 1992.
Rob Dobson, director of S&P Global Market Intelligence said: ‘War production also caused noticeable changes in prices and supply chains.
“Delivery times have lengthened to their greatest extent since mid-2022, while inflation was the fastest since the UK left the ERM in 1992.
The result of high price levels and lack of resources have also been factors hindering production.
Dark economic and political conditions are also affecting business confidence and hiring practices. Optimism about the year ahead has fallen to a six-month low and the latest round of job cuts is the deepest since last September.’
The price of food reaches 9% at the end of the year
While Trump’s comments may have injected some much-needed confidence into markets, there have been few details on when or how the Strait of Hormuz will be opened.
It means that disruptions to supply and energy markets are likely to persist, putting pressure on household finances.
The Food and Drink Association has warned that grocery prices could rise by at least 9 percent by the end of the year, up from the 3.2 percent it predicted last September.
Dr Liliana Danila, FDF’s chief economist, said: ‘The food and drink sector is already feeling the brunt of this political upheaval.
‘As one of the UK’s most energy-intensive industries, manufacturers face rising energy bills, rising transport and packaging costs and disruption across key supply chains.
‘These pressures are hitting at the same time, and it’s a big challenge for businesses to embrace.’
He added: ‘The current situation is unprecedented and difficult to predict, however given the scale and speed of these cost increases, and despite the companies’ best efforts not to pass on price increases, it is clear that food prices will rise in the coming months.’
Gilt stocks are going down a lot
The FTSE is up 160 points since the market opened as investors hope the end of the Iran war may be near.
The release was felt in bond markets, with gilt yields falling sharply as investors began to reduce their expectations of a rate hike.
Markets now expect a single increase of 25 points by the end of the year and a possible second, compared to two or three hikes previously expected.
Five-year yields were down around 11 points to 4.358, while 10-year yields were down 9 points to 4.819 percent.
Berkeley has a nose behind a dull improvement
Berkeley shares fell 17 percent to 2,838 after a strong update from investors.
The homebuilder said it has scaled back investment and halted new land acquisitions as it grapples with high costs and the deep recession. It highlighted ‘unexpected increases in costs and controls’.
Chris Beauchamp, principal analyst at IG said:‘Warnings about the UK economy continue to pour in, with Berkeley the latest to sound the alarm.
‘Although it is on track to meet targets, the move to reduce investment and halt new land acquisition is a sign that the company is pulling the plug to wait for better times. While it makes sense, it has given investors a new reason to dump the shares, sending them to ten-year lows in the first trade.’
Topps tiles fall after announcing plans to close stores
Retailer Topps Tiles fell more than 8 percent this morning after it announced plans to close 23 of its stores.
It said it would help “reduce government and macro-driven high prices” and ease the DIY market.
FTSE opens in green
London’s blue-chip index opened 1.08 percent, or 110 points, to 10,287, on hopes that the war with Iran will end soon.
The FTSE closed 48 points higher on Tuesday, and is up more than two per cent in the year to date.
Brent crude is rising by $100 a barrel again.
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