Stock market: futures react positively to US-Iran deal; oil and gas prices fall sharply
The euro is trading above the $1.16 mark
European futures are rising sharply following the agreement reached overnight between the United States and Iran to end the war in the Middle East. The EuroStoxx 50 futures contract is up 1.6%, whilst the FTSE MIB futures contract has gained 1.4%. Asian stock markets are also positive, all showing strong growth, whilst crude oil prices are falling: WTI is down 4.7% at $80.8 per barrel and North Sea Brent is down 4.3% at $83.54. US futures are also up sharply. In fact, yesterday, on President Donald Trump’s 80th birthday, the first digital signature was affixed to the agreement, which will then be ratified in Geneva next Friday. The news was announced by the Pakistani Prime Minister, Shahbaz Sharif. The announcement was far from a foregone conclusion, given that on the very same day Israel attacked Lebanon once again, putting the negotiations at risk. In any case, the signing scheduled for next Friday does not represent a definitive peace agreement, but rather a sort of memorandum of understanding intended to open more in-depth negotiations over the next 60 days. These negotiations will likely focus primarily on the issue of Iran’s enriched uranium. The markets, in any case, welcome the shared desire to end the conflict, whilst remaining mindful of the risks and unforeseen events that may arise in the coming months. They are also showing confidence in President Trump’s statements, in which he has called on oil companies to ‘rev up their engines’, assuring them that the Strait of Hormuz will be reopened.
Attention now turns to the trend in crude oil prices and, consequently, to inflation, which is being closely monitored by central banks, particularly the Federal Reserve. The FOMC will meet tomorrow and the day after, for the first time under the leadership of Kevin Warsh. Economists expect the current interest rate level to be confirmed, but will be listening closely to the new chairman’s remarks for any clues regarding the future direction of monetary policy. The Bank of Japan’s Policy Board will also 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.
On the Milan Stock Exchange, attention is likely to remain focused on the banking sector. Ferrari could also come to the fore, riding the wave of enthusiasm following Lewis Hamilton’s victory in Catalonia.
In the foreign exchange market, the euro has strengthened to $1.1609, compared with $1.1581 at Friday’s close. The single currency is also trading at 185.84 yen (up from 185.5), whilst the dollar/yen exchange rate stands at 160 (down from 160.2). Natural gas fell by over 5%, dropping to 44.2 euros per megawatt hour. Bitcoin also rose, gaining over 3% to 65,845 dollars.
