Markets have once again been on a rollercoaster this week after President Trump posted on Truth Social claiming that he had held positive and encouraging talks with Iranian authorities aimed at ending the war. He further stated that the US would pause additional military action for five days while negotiations progressed, adding that he had sent authorities a 15-point peace plan to consider. Later in the day Iranian officials swiftly denied that any such talks had taken place. Interestingly, the most notable aspect of this episode was not whether the discussions occurred, but how markets reacted to the mere suggestion that they had. Markets that had been firmly in the red off the back of the weekend, but reversed course in a matter of minutes.
The FTSE 100, for instance, rose 2.73% just ten minutes after President Trump’s post, having previously been down (2.21%). Similarly, S&P futures rebounded to over 3% after earlier falling as much as (0.73%). While the facts surrounding the alleged talks remain uncertain, the episode highlights just how rapidly markets can shift in response to new information, and of course, how important it is to maintain a calm head during periods of market uncertainty, seeing volatility as a potential buying opportunity rather than reason to withdraw.
For investors concerned about the potential for prolonged spikes in oil prices, early trading offered some reassurance. Brent crude fell by roughly 6%, hovering around $98 per barrel after nearing $110 the previous day. This shift suggests that markets are moving away from the notion that supply disruptions will be a persistent feature of oil availability in the near term.
In the UK, CPI held up at 3% in February, the same as the previous month. The annual rate for food prices edged down slightly, while clothing prices were the biggest upward contributor. Core inflation, which strips out volatile elements of food and energy, ticked up modestly to 3.2% from 3.1% in January. Meanwhile, the UK’s manufacturing PMI for March slipped to 51.4 from 51.7 in February, with the latest data indicating that output growth and global demand had softened.
Meanwhile, in the Eurozone, the composite PMI for March declined to 50.5 from 51.9 in February, leaving economic activity hovering just above contractionary territory. While the services sector continues to expand, manufacturing activity has weakened. The data points to slowing momentum, with businesses adopting a more cautious approach to hiring as demand softens. This follows closely on the release of the Eurozone’s March consumer sentiment data, which showed confidence falling to -16.3 from -12.3 in February. Given that the data was collected shortly after initial US and Israeli strikes on Iran, it is likely that geopolitical tensions influenced sentiment.
Elsewhere, it was announced on Tuesday that the EU and Australia have reached a trade agreement aimed at reducing tariffs on a range of consumer goods, including wine, chocolate, and European cars, making them more affordable in Australia. While tariff reductions will be implemented gradually over several years, certain agricultural sectors in Europe will remain subject to quotas rather than seeing tariffs fully eliminated.
Still to come this week we have UK retail sales and consumer confidence and U.S. initial jobless claims.
Nicola Tune, Portfolio Specialist
