Dow Hits Record as Investors Position for Third Quarter

Summary

The Dow closed at a record high as easing US-Iran tensions and renewed buying in technology shares lifted Wall Street heading into the third quarter. The S&P 500 and Nasdaq also advanced strongly, while investors largely looked through recent geopolitical risks as oil prices returned to pre-conflict levels. The US dollar remained firm on expectations of further Federal Reserve tightening, while the Japanese yen weakened to its lowest level since 1986, increasing speculation of intervention.

Equities

The FTSE 100 closed 0.2% lower on Monday as mining and financial stocks weighed on the UK market, while the FTSE 250 fell 0.6%. Investors also reacted to renewed tensions in the Middle East, while a business survey showed UK companies' expectations for growth over the coming quarter had fallen to their lowest level of the year. Official data released on Tuesday meanwhile confirmed that the UK economy expanded by 0.6% at the start of 2026.

Mining stocks led the decline late on Monday as lower gold prices pushed the sector lower. Anglo American, Fresnillo and Rio Tinto closed between 1.2% and 3% lower. British American Tobacco slipped 0.7% after announcing plans to reduce its global workforce by 20%, while homebuilders also came under pressure, with the sector index falling 2.4%.

Defence-related shares also weakened after the UK Ministry of Defence said it would abandon plans to replace ageing destroyers and instead focus on drone warships. Melrose Industries closed 1.3% lower, while Babcock fell 5.1%. In contrast, Bridgepoint surged 16.1% after agreeing to acquire Kayne Anderson's US real estate business in a deal worth around $1.4 billion. BT edged higher after announcing a 50:50 joint venture with Verizon combining their international enterprise operations.

US markets moved in the opposite direction, with the Dow Jones closing 0.6% higher at a record high on Monday. The S&P 500 gained 1.2% and the Nasdaq jumped 2.1% as technology shares rebounded ahead of the second-quarter earnings season. RBC Capital Markets also raised its 12-month target for the S&P 500 to 8,150 from 7,900, citing resilient earnings expectations and a supportive economic backdrop.

SpaceX climbed 7.2% after Nasdaq confirmed the company will join the Nasdaq 100 Index on 7 July. Alphabet rose 4.8% on its first trading day as a member of the Dow Jones Industrial Average. Comcast added 4.5% after unveiling plans to separate NBCUniversal and Sky into an independent publicly listed company through a tax-free spinoff. Investors will now turn their attention to Thursday's US employment report, which is expected to provide the next major update on the strength of the American economy.

Forex & Commodities

The US dollar remained firm early on Tuesday, although it eased slightly from its 13-month high as investors awaited this week's US employment data for fresh clues on the Federal Reserve's policy path. The dollar index traded around 101.3, remaining on course for a second consecutive quarterly gain. The Japanese yen weakened to ¥162.2 per dollar, its lowest level since 1986, prompting renewed warnings from Japan's Finance Minister that authorities stand ready to intervene if necessary. Sterling edged lower to around $1.323, while the euro slipped to approximately $1.140.

Spot gold fell early on Tuesday to around $3,986 per ounce, leaving the precious metal on course for its largest monthly decline since late 2008 and its biggest quarterly fall since 2013. The combination of a stronger US dollar and expectations of higher US interest rates continued to reduce demand for bullion, with investors now looking to this week's employment figures for further direction. Platinum and silver also remained under pressure, while palladium posted modest gains.

Oil prices moved lower early on Tuesday as markets focused on the possibility of renewed US-Iran discussions in Doha, despite uncertainty over whether formal talks will take place. Brent crude traded around $72.51 per barrel, while US West Texas Intermediate stood near $70.36, with both benchmarks almost back to the levels seen before the conflict began in late February. Investors also continued to monitor Chinese demand and shipping through the Strait of Hormuz, where traffic has recovered even as regional tensions remain fragile.