The US-Iran deal pushes Europe to new highs, with Milan breaking the 52,000 mark

(Il Sole 24 Ore Radiocor) - The ceasefire agreement between the United States and Iran is boosting European stock markets, which reached new highs during the day, and is pushing down the price of oil. The FTSE MIB in Milan, in particular, surpassed the 52,000-point mark for the first time, ahead of the official signing of the agreement, scheduled for Friday in Geneva. The parties will then engage in in-depth negotiations over the next sixty days to reach a final peace agreement. Towards the end of the day, however, European markets slowed their pace, whilst investors preferred to take some profits on recent gains, concerned by US President Donald Trump’s new threats regarding tariffs and by lingering doubts, in particular, over the full reopening of the Strait of Hormuz without transit fees. “We expect the strait to be open without tolls in the long term, and this is one of the issues we will address in the technical negotiations,” emphasised US Vice-President J.D. Vance. All these issues are bound to feature on the agenda of the G7 summit, which is currently getting underway in Evian, France. “I asked him not to tax American companies, and if they do, I will have no choice but to impose a 100% tariff on all champagne and all wines from France,” Trump stressed, referring to French President Emmanuel Macron and the tax on US big tech firms.

The market’s attention is also focused on the central bank meetings scheduled for the coming days, and in particular on Kevin Warsh’s debut as head of the Federal Reserve. Economists expect US interest rates to remain at their current levels, but will be listening closely to the new chairman’s remarks for any clues as to the future direction of monetary policy. The Bank of Japan’s Policy Board is also due to meet tomorrow, and is expected to raise rates by 25 basis points. On Thursday, it will be the Bank of England’s turn, though no changes to monetary policy are expected.

Among the leading stocks on the Milan stock exchange, the sharp rises in Stellantis and Ferrari, buoyed also by Hamilton's triumph yesterday at the Barcelona Grand Prix. Buzzi and Prysmian. Banking stocks performed strongly overall, particularly those of Bper Banca and Banco Bpm. Positive but less volatile Unicredit, which this morning responded to Commerzbank’s insinuations regarding alleged manipulation in connection with the public offer. The bank announced that it had brought these matters to the attention of the German BaFin, requesting ‘appropriate checks’ on Commerzbank’s statements. The luxury sector also performed well, buoyed by positive signs of openness in the Middle East: Brunello Cucinelli. Reaching new highs Generali, with Berenberg raising its target price to €71. Energy stocks are struggling in the wake of the downward trend in oil and gas prices, with Eni, Tenaris and Italgas. Also down: Avio is also performing poorly.

On the energy front, oil prices have fallen to their lowest levels in three months: Brent crude slips to $83 a barrel in the August contract (-4.88%) and July WTI stands at $80.55 (-5.1%) after hitting a low below $80. On the Amsterdam exchange, the July TTF natural gas future lost 9.6% to €42.2 per megawatt hour. In the currency market, the euro strengthened to $1.1603, compared with $1.1581 at Friday’s close. The single currency is also worth 185.83 yen (up from 185.5), whilst the dollar/yen exchange rate stands at 160.16 (down from 160.2). Bitcoin is also up, gaining ground above $67,000. Spot gold rose above $4,300 an ounce after hitting a three-month low last week at $4,023 an ounce.

In the bond market, prices closed lower for the spread between BTPs and Bunds following the agreement between the US and Iran to end the war in the Persian Gulf. At the close of trading, the yield spread between the benchmark 10-year BTP and the German Bund of the same maturity stood at 71 basis points, down 2 points from last Friday’s close. The decline was more pronounced for the yield on the benchmark 10-year BTP, which outperformed other eurozone government bonds of the same maturity slightly and ended the session at 3.67%, down from the previous close of 3.73 per cent.