Global equity rally cools and FTSE 100 lower thanks to ex-dividends, while oil prices sink on Iran deal

​Global market rally continues to ease as euphoria fades

​While the overall rally in global stock markets seems to have further to go, momentum has eased since Monday’s trade truce announcement. Markets were going to find it hard to continue the runaway gains, but the overall positive view of recent developments remains.

​What we’re seeing now is a return of flows to stock markets, investors having been spooked out of equities in March and April. Fears of a recession seem to have been overdone, at least following the pause in the new US tariffs to allow time for trade negotiations to take place.

​Even if more trade deals are announced, it is still the case that tariffs on goods entering the US will be much higher than anyone dared to contemplate. This should result in a not insignificant hit to earnings, though the impact will only start to become clear in future earnings reports. The question for all investors is, have markets already priced in enough bad news following their big losses in the first half of April to avoid further falls later in the year? In addition, it might be sensible to ask, are they now pricing in too much good news following their huge gains from the April low?

​FTSE 100 hit by ex-dividend names

​Asian markets were generally lower as bullish momentum faded following Monday’s bounce, putting European markets on the back foot to start the day. The picture for the FTSE 100 was complicated by a slew of stocks going ex-dividend, which took around 21 points off the index. Recent trading has seen the index drift sideways around 8600, unable to push much above this level but also finding buying support around 8550.

​Weaker open expected in the US

​US markets have trimmed their gains over the past couple of sessions, though the softer-than-expected inflation figure from Tuesday helped to maintain an overall positive outlook. Investors continue to watch anxiously for clues about the current health of the world’s largest economy, and today’s Walmart earnings will help provide some additional information on this topic, particularly regarding how well consumer spending is holding up.

​After Tuesday’s consumer price inflation data, today sees the turn of industrial inflation, or producer price inflation (or ‘factory gate inflation’). This can often provide some more up-to-date data about price movement, since industrial pricing tends to respond more quickly to changes. Higher-than-expected inflation here might revive fears that tariffs will prove to be inflationary, at least in the short-term, which might put fresh pressure on equities.

​It is a busy day for economic data in the US, since weekly jobless claims data is also published. Overall the US jobs picture remains strong, but with stocks having rallied so much over the last month there is a risk that signs of weakness here might prompt a short-term drop in stocks. Finally, Federal Reserve (Fed) chairman Jerome Powell will make a speech today. While not an official speech on monetary policy, his remarks will be closely-scrutinised, particularly since questions are being asked about why the Fed continues to hold rates steady even in the face of declining inflation figures.

​Oil prices pressured by news of possible Iran deal

​Oil prices have dropped sharply overnight on news that Iran may reach a deal with the US over its nuclear weapons programme. In a surprising sign, Tehran appears willing to give up any pretensions to nuclear weapons, and will instead only push on with nuclear power, allowing in inspectors to monitor the situation, in return for a lifting of sanctions.

​Such a move could see Iranian oil make a return to world markets. Iran was the world’s seventh largest producer of oil in 2024, so an increase in supply would naturally put further pressure on oil prices. Further Iranian production could come online in the future if investment flows into the country.