- Ceasefire talks provide a catalyst for equity markets.
- US investors await comments from Fed Chair.
- Oil continues to drop as supply disruptions look unlikely.
- Bunzl takes an early step to restoring investor confidence.
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Risk assets are back on the menu after President Trump announced a ceasefire has been brokered between Israel and Iran. The details may still be a little up in the air, but global stock markets are pushing higher as a result.
Iran’s telegraphed retaliation against the US had already been taken as a sign that de-escalation was the most likely path forward, which had helped lift US stocks, and the rally has extended. Traders have arguably been betting on this outcome for a while. Despite the turmoil over the weekend, oil prices were quick to shift into reverse – an early signal that markets were betting on de-escalation sooner rather than later. Iran’s response notably refrained from targeting any oil facilities or the important Strait of Hormuz, and the jump in prices over the past few days has mostly been erased now, positive news for the US administration and investors alike. Lower oil prices are a key component to keep inflation down and something the US Fed will have one eye on when thinking about whether to cut interest rates at the next meeting in July.
US markets were also supported by dovish comments from multiple Fed members, who hinted at rate cuts at the Fed’s next meeting in July. The inflation impact of tariffs, though seemingly small so far, remains one of the biggest unanswered questions. Investors now await Fed Chair Jerome Powell’s testimony before Congress later today and again on Wednesday. Markets aren’t expecting a cut in July, but there’s increasing odds of at least a couple by the end of the year, providing another tailwind to US equity markets.
After rocking the boat in April, Bunzl has thrown investors a lifeline with a calm, no-surprises trading update. Just a few months ago, the story was very different, as a series of issues triggered a major sell-off. Typically known for its stability, Bunzl’s uneventful update today, while not particularly exciting on the upside, should be received relatively well. Performance is expected to improve over the second half, and fixes are underway to address pricing issues in the key North American markets. With expectations now reset, Bunzl should be able to get back to what it does best: predictable growth.
