(Sharecast News) - London stocks had extended gains by midday on Tuesday, led higher by strength in the defence sector, as investors mulled the latest on the peace deal between the US and Iran.
The FTSE 100 was up 0.6% at 10,488.48, while Brent crude was down 2.7% at $80.93 a barrel and West Texas Intermediate was 3% lower at $78.36, extending losses.
Summing up the latest developments in the Middle East conflict, Danske Bank said: "The US-Iran deal is in the spotlight after a series of overnight updates. The agreement has been virtually signed, ending the US naval blockade of Iranian ports, reopening the Strait of Hormuz and launching 60 days of nuclear talks.
"Trump said ships are already moving and Hormuz will be fully open by Friday, though mine clearance will take time. Passage is expected to be toll-free for at least 60 days, with Iran and Oman to manage the strait thereafter. Details remain unclear, and Israel's leadership and Hezbollah's ongoing attacks underscore persistent regional tensions."
Speaking to CNN on Tuesday, US Vice President JD Vance said the memorandum of understanding between the US and Iran is expected to be formally signed in Geneva later this week. He said the agreement was a general, one-and-a-half-page document, with further details still to be negotiated and conceded that a number of issues remain.
"On a number of issues, we are going to have to figure this stuff out during the technical negotiation phase, but what the MOU does is set up a framework whereby the Iranians get the benefits of the bargain by meeting their obligations under the bargain," he told CNN.
Kathleen Brooks, research director at XTB, said: "Although the deal has not been formally signed, there already appears to be a peace dividend for markets. US indices closed at record highs on Monday, along with a fresh record high for the Eurostoxx 600 index.
"The drop in the oil price and a significant decline in bond yields are also boosting the outlook for stocks. We are seeing European markets play catch up with the US, and this could continue, as some European indices remain below their pre-war levels, such as the FTSE 100, which remains about 500 points away from its early January high."
Away from the Iran war, investors were mulling the latest data out of China, which showed that retail sales fell for the first time in more than three years in May. According to the National Bureau of Statistics, retail sales fell 0.6%, reversing April's 0.2% uplift and missing consensus for a flat print. It was the first decline since December 2022.
Fixed-asset investment was also sharply lower, falling 4.1%. However, in contrast industrial production rose to 4.5%, up from 4.1% a month earlier and beating market forecasts for 4.3%, while the unemployment rate ticked marginally lower, to 5.1% from 5.2%.
Policy announcements from the Bank of Japan and Reserve Bank of Australia were also in focus.
The BOJ lifted its policy rate from 0.75% to 1% - the highest level since 1995 - as widely expected. The vote was split 7-1, with Governor Ueda absent due to hospitalisation. Meanwhile, Australia's central bank held interest rates at 4.35% but warned that it was prepared to tighten monetary policy again if inflation persisted.
In equity markets, engine maker Rolls-Royce was the standout gainer on the FTSE 100, closely followed by defence firms BAE Systems and Babcock. Chemring and Qinetiq also rallied.
Scottish Mortgage Investment Trust - which has a significant holding in SpaceX - was also a top riser.
On the downside, SDCL Efficiency Income Trust slid as it scrapped its dividend and published a circular asking shareholders to approve a wind-down at the annual general meeting next month.
Rathbones tumbled after saying it expects to incur 60m of additional costs over the next two years as it implements changes to address issues identified in a review of its wealth management business.
Associated British Foods was in the red even after the Competition and Markets Authority cleared its 75m acquisition of Hovis.
In broker note action, Frasers Group was hit by a downgrade to 'underperform' from 'sector perform' at RBC Capital Markets, while Currys was boosted by an upgrade to 'outperform' from 'sector perform' by the same outfit.
Market Movers
FTSE 100 (UKX) 10,488.48 0.55%
FTSE 250 (MCX) 23,328.33 -0.15%
techMARK (TASX) 5,926.68 0.35%
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 1,396.20p 3.33%
BAE Systems (BA.) 1,862.00p 2.61%
Convatec Group (CTEC) 209.20p 2.45%
Babcock International Group (BAB) 1,053.50p 2.03%
Flutter Entertainment (DI) (FLTR) 8,136.00p 2.01%
Entain (ENT) 600.40p 1.94%
Halma (HLMA) 4,086.00p 1.74%
Scottish Mortgage Inv Trust (SMT) 1,475.50p 1.69%
Barclays (BARC) 487.90p 1.58%
NATWEST GROUP (NWG) 625.00p 1.50%
FTSE 100 - Fallers
Rentokil Initial (RTO) 441.60p -1.93%
BT Group (BT.A) 199.05p -1.63%
Associated British Foods (ABF) 1,895.50p -1.58%
Pearson (PSON) 1,123.00p -1.49%
Marks & Spencer Group (MKS) 373.50p -1.37%
The Sage Group (SGE) 815.80p -1.23%
Sainsbury (J) (SBRY) 308.00p -1.15%
Kingfisher (KGF) 282.20p -1.05%
Burberry Group (BRBY) 1,143.00p -0.95%
Bunzl (BNZL) 2,532.00p -0.86%
FTSE 250 - Risers
Chemring Group (CHG) 515.00p 3.00%
Baillie Gifford US Growth Trust (USA) 340.00p 2.72%
Partners Group Private Equity Limited. (EUR) (PEY) 8.54p 2.64%
Edinburgh Worldwide Inv Trust (EWI) 286.50p 2.50%
Currys (CURY) 153.80p 2.40%
IntegraFin Holding (IHP) 361.50p 2.26%
Renishaw (RSW) 5,245.00p 2.14%
QinetiQ Group (QQ.) 452.40p 1.84%
XP Power Ltd. (DI) (XPP) 2,025.00p 1.81%
Johnson Matthey (JMAT) 2,126.00p 1.72%
FTSE 250 - Fallers
SDCL Efficiency Income Trust (SEIT) 35.75p -23.80%
Rathbones Group (RAT) 1,628.00p -17.01%
Frasers Group (FRAS) 707.00p -5.98%
WH Smith (SMWH) 414.00p -5.58%
Aston Martin Lagonda Global Holdings (AML) 41.14p -3.61%
Wetherspoon (J.D.) (JDW) 646.50p -3.37%
Raspberry PI Holdings (RPI) 844.25p -3.07%
Ceres Power Holdings (CWR) 580.50p -2.76%
Diversified Energy Company (DI) (DEC) 976.00p -2.49%
Pagegroup (PAGE) 123.10p -2.38%
65.97 (0.63%)
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