Source: Sharecast
As Chris Beauchamp, chief market analyst at IG, put it, “The old adage suggests investors should buy on the sound of cannon, and sell on the sound of trumpets.
“But over the past six weeks investors have done the opposite.
“Having cut back on stocks when the war erupted they are now rushing back to buy, and with the S&P 500 now trading at a much lower valuation the logic makes sense.”
The pan-European Stoxx 600 jumped 3.88% to 613.50, with Germany’s DAX rising 5.06% to 24,080.63 and France’s CAC 40 gaining 4.49% to 8,263.87.
London’s FTSE 100 advanced 2.51% to 10,608.88.
The rally followed comments from US president Donald Trump that he had agreed “to suspend the bombing and attack of Iran for a period of two weeks,” conditional on Tehran ensuring the “complete, immediate, and safe opening of the Strait of Hormuz.”
Crude prices plunged on the prospect of restored supply, with Brent crude last down 13.17% on ICE at $94.88 per barrel, and the NYMEX quote for West Texas Intermediate dropping 15.64% to $95.29.
However, tensions remained fragile, with Israel and the UAE reporting incoming missiles and drones from Iran that triggered air defence systems.
Beauchamp added that “oil prices are still well up on the levels seen in late February, but in markets its all about the direction and speed of travel rather than the absolute price.
“Having dropped out of three figures, the price may well continue to go lower - successful passage of the straits by a few vessels should help nudge prices lower, alleviating concerns about a second wave of inflation.”
Fresh economic data points to softness
On the economic front, data pointed to continued softness across Europe.
Eurozone retail sales fell 0.2% in February, in line with expectations, marking the third stagnation or decline in four months as demand weakened in the bloc’s largest economies.
Sales dropped 0.6% in Germany and 0.1% in France, while Italy and Spain were unchanged.
By category, food, drinks and tobacco sales fell 0.5%, non-food products were flat, and automotive fuel sales rose 0.7%.
In Germany, factory orders rose 0.9% in February following an 11.1% slump in January, but the rebound undershot expectations as a 25.9% drop in transport equipment orders offset gains elsewhere; excluding large orders, demand rose 3.5%.
Real manufacturing turnover declined 0.5% over the month.
In the UK, house prices fell 0.5% in March after a 0.3% increase in February, with annual growth slowing to 0.8% from 1.2%, according to Halifax, leaving the average property price at £299,677.
Halifax’s Amanda Bryden said the slowdown reflected uncertainty linked to the Middle East conflict and rising mortgage rates, though she noted prices could remain resilient.
Across the Atlantic, US mortgage applications slipped 0.8% in the week to 3 April, extending recent declines, as refinancing activity fell 3% and purchase applications rose 1% week-on-week but were down 7% year-on-year.
Reflecting the broader shift in sentiment, Danni Hewson, head of financial analysis at AJ Bell, said: “The UK market’s gains were replicated on Wall Street and across Europe as expectations for the trajectory of interest rates shifted once again.”
Oil plays tumble as travel stocks rise
In equity markets, energy stocks were sharply lower in line with the drop in oil prices, with Equinor down 7.69%, BP falling 5.17%, Var Energi losing 7.25%, Repsol declining 5.76%, Eni down 5.57%, Galp Energia off 5.21% and Shell 5.35% lower.
Hewson noted that “key features of trading in London included a sharp reversal in the trends we have seen since the end of February as energy stocks and defensive names were among the few to lose ground while industrial names, banks, names linked to the aviation sector, retailers and housebuilders were among those to surge higher.”
On the upside, airlines and leisure names were among the strongest performers, benefiting from lower fuel costs and improved sentiment, with TUI up 9.86%, easyJet rising 11.11% and Deutsche Lufthansa gaining 10.27%.
She added that “considerable uncertainty remains however and it will be informative to see if the momentum is maintained once focus turns from news of the ceasefire itself to the progress of talks between the US and Iran and, in particular, the practicalities of resuming shipping at scale through the Strait of Hormuz.”
Reporting by Josh White for Sharecast.com.
