S&P 500 Nears Record High as Yen Holds Intervention Gains

Summary

The S&P 500 moved closer to record highs as investors were encouraged by another strong round of corporate results, with futures edging higher ahead of Tuesday's session. The yen gave back a small part of its recent rally but remained significantly stronger following coordinated intervention by Japan and the US. Asian equities traded lower, while FTSE 100 futures pointed to a modestly firmer open. Oil prices recovered after Monday's sharp decline as markets continued to monitor developments in the Middle East.

Equities

The FTSE 100 closed 0.1% lower on Monday at 10,857.7, marking its third consecutive daily decline as weakness in AstraZeneca outweighed improved sentiment across other sectors. The FTSE 250 outperformed, rising almost 1% to 24,224.77, helped by gains in housebuilders and transport stocks as lower oil prices supported broader market confidence.

AstraZeneca shares fell 8.9% on Monday after reports that it was holding preliminary merger discussions with Bristol Myers Squibb. Investors reacted cautiously to the prospect of a deal that could create one of the world's largest pharmaceutical companies, making AstraZeneca the weakest performer in the FTSE 100.

Housebuilders also performed well. Vistry Group climbed nearly 8%, while Bellway and Persimmon gained 2.8% and 2.1% respectively as UK government bond yields eased. Shipping services company Clarkson rose 8.9% after management issued a more optimistic full-year outlook, making it the strongest performer across the London market. UK manufacturing continued to expand for a ninth consecutive month in July, although growth slowed to its weakest pace in four months.

On Wall Street, the Dow Jones Industrial Average closed at a record high on Monday, rising 1.32% to 53,178.41. The S&P 500 gained 1.48% to 7,600.50, while the Nasdaq Composite advanced 2.13% to 25,913.90 as investors welcomed easing geopolitical tensions and focused on another busy week of corporate earnings.

Amazon climbed 4.6% after last week's earnings release lifted its market value above $3 trillion for the first time. SpaceX gained 5.6% ahead of its first quarterly results since its stock market debut, while investors also looked ahead to earnings from Advanced Micro Devices, SanDisk and Western Digital later this week. Marriott International fell 7% after forecasting third-quarter profits below analysts' expectations. Bristol Myers Squibb added 0.2% following reports of merger talks with AstraZeneca, while New York Federal Reserve President John Williams said he remained optimistic that inflation pressures would continue to ease gradually.

Forex & Commodities

The US dollar steadied early this morning after recovering some of the losses triggered by last week's coordinated intervention by Japan and the United States to support the yen. The Japanese currency remained close to a three-month high at 157.4 per US dollar after surging over the previous three trading sessions, keeping traders cautious about rebuilding bearish positions amid the risk of further intervention. The euro traded at $1.151, sterling eased to $1.343, and the dollar index edged back to 99.98 as attention shifted to a series of US labour market releases, culminating in Friday's non-farm payrolls report.

Spot gold edged higher early this morning to $4,060 per ounce as investors balanced uncertainty surrounding possible US-Iran negotiations with expectations for this week's US employment data. Market participants are also watching job openings, the ADP employment report and Friday's payrolls figures for further clues on the Federal Reserve's policy outlook. Silver rose to $58.74 per ounce, platinum climbed to $1,647 and palladium advanced to $1,280.

Oil prices recovered early this morning after Monday's sharp sell-off, with Brent crude rising to $84.89 a barrel and US West Texas Intermediate reaching $81.11. The rebound came despite Iran rejecting US claims that negotiations to end the conflict were under way, leaving uncertainty over the Strait of Hormuz and keeping supply risks firmly in focus. While shipping flows through the region have remained broadly stable, concerns over potential disruptions continue to support crude prices following Monday's heavy decline.