Oil Slides as Warsh Fed Decision Looms

Oil fell sharply on Tuesday and Brent stayed below $80 early on Wednesday as traders weighed a US-Iran peace deal and uncertainty over the Strait of Hormuz. The dollar eased, sterling held near $1.343, and the yen remained weak around intervention-watch levels. The FTSE 100 rose on financials and defence stocks, while the Dow closed at a record high and the Nasdaq fell as technology shares weakened. SpaceX climbed strongly, while Rathbones and SDCL Efficiency Income Trust dropped heavily in London.

Equities

The FTSE 100 rose 0.6% on Tuesday to 10,490.35, supported by gains in financial and industrial stocks. The FTSE 250 edged 0.1% lower as several company-specific declines weighed on the mid-cap index.

Banking stocks led the advance in London. HSBC closed 1.6% higher on Tuesday, while Barclays gained 2.1%. Aerospace and defence shares also moved higher, with Rolls-Royce rising 2.5% to lead the FTSE 100 and BAE Systems adding 2.2%.

Associated British Foods fell 1.6% on Tuesday after UK competition regulators approved its acquisition of Hovis. Wealth manager Rathbones suffered a much sharper decline, closing 16.6% lower and hitting a one-year low after announcing it would pause the onboarding of new clients for 12 months. SDCL Efficiency Income Trust dropped 22% after proposing a wind-down of the business. Recruitment specialist SThree slipped 0.5% after reporting lower first-half net fees amid subdued growth conditions.

Early on Wednesday, consumer goods group PZ Cussons said annual profit is expected to meet or slightly exceed previous guidance, supported by strong sales and a more stable Nigerian naira.

In the United States, the Dow Jones Industrial Average closed 0.64% higher on Tuesday at a record 51,999.67. The S&P 500 fell 0.57%, while the Nasdaq Composite declined 1.15% as technology shares came under pressure following recent gains.

SpaceX rose 4.8% on Tuesday to close at $201.80 after reaching a record intraday high of $225.64. The move lifted its market value above Amazon’s and briefly above Microsoft’s during trading. Financial stocks outperformed, helping offset weakness elsewhere, while the Philadelphia Semiconductor Index fell 5.7%.

Olin dropped 5.9% after announcing an all-stock acquisition of Huntsman valued at $2.43 billion. Huntsman shares fell 17% as investors reacted to an offer price below the company’s recent market valuation. Yum Brands gained 1.9% after confirming plans to sell the Pizza Hut business for $2.7 billion as it responds to competitive pressures and cautious consumer spending.

Forex & Commodities

The US dollar edged lower early on Wednesday, with the dollar index at 99.50 ahead of the Federal Reserve’s first interest rate decision under Chair Kevin Warsh. The Fed is widely expected to leave rates unchanged, but investors will be watching its statement, projections and press conference for any shift towards a more neutral or hawkish stance on inflation.

Sterling was little changed at $1.343 early on Wednesday, while the euro held steady at $1.161. The yen remained weak at 160.3 per dollar, keeping traders alert to the risk of further currency intervention by Japanese authorities.

The Bank of Japan raised interest rates on Tuesday to a 31-year high of 1%, marking another step in its policy normalisation. Policymakers signalled they were ready to tighten further to contain price pressures, but gave few clear signals on when the next increase could come.

The Australian dollar traded at $0.7063 early on Wednesday after the Reserve Bank of Australia held its cash rate at 4.35% on Tuesday. The central bank said the economy was slowing under tighter financial conditions, while warning it could still raise rates again if inflation requires it. The New Zealand dollar fell to $0.5825.

Spot gold was steady at $4,328 per ounce early on Wednesday, close to a one-week high reached on Monday, as investors waited for the Fed decision. Silver rose to $70.32 per ounce, while platinum fell to $1,788 and palladium slipped to $1,344.

Oil prices fell slightly early on Wednesday after sharp losses on Tuesday. Brent crude eased to $78.81 a barrel and US West Texas Intermediate slipped to $75.93, as investors weighed the US-Iran peace deal against uncertainty over the full reopening of the Strait of Hormuz.