Report by Renta 4
European markets open slightly lower (Eurostoxx futures down 0.2%, DAX down 0.2%), whilst US futures are still holding onto much of yesterday’s gains (S&P up 0.6%, Nasdaq futures up 0.8%), during which their markets remained closed.
The optimism that drove the markets yesterday is fading this morning. European futures point to a lower opening (Eurostoxx futures down 0.2%, DAX down 0.2%) and the Asian session has seen profit-taking following US and Israeli air strikes on Iranian ships and missile bases in the Strait of Hormuz.
The US Central Command has described the attacks as ‘defensive’, aimed at protecting its troops; however, the incident highlights the extreme fragility of the ceasefire and dampens expectations of an imminent peace deal. Although President Trump insists that negotiations are “progressing well”, the reality is that fundamental stumbling blocks remain on the table, complicating any deal: Iran’s nuclear programme, the release of frozen assets demanded by Tehran and, crucially, the conflict in Lebanon, where Israel has announced an intensification of its attacks on Hezbollah.
The market reaction has been immediate: Brent crude has rebounded by nearly 2% to $98/bbl, the dollar has strengthened and stock futures have pared gains. This episode reinforces the view that the market had priced in an overly optimistic scenario. Volatility will continue whilst the future of the negotiations becomes clearer, with the focus now on Doha (Qatar).
On the macro front, attention will be on the Conference Board’s May consumer confidence figures for the US, which will remain under downward pressure from high petrol prices and rising mortgage rates, whilst in Spain we will see April’s producer prices, which could continue to rise in the face of the energy ‘shock’ stemming from the conflict in the Middle East, with the risk that this will lead to higher inflation.
On the corporate front, it is worth noting that the optimism surrounding a potential technological breakthrough by Huawei has been boosting Chinese semiconductor manufacturers on the Hong Kong stock exchange. Meanwhile, Ferrari has unveiled its first 100% electric vehicle, a five-seater model priced at €550,000, marking a milestone in its electrification strategy.
