UK Stocks Jump 2% on US-Iran Peace Deal Hopes, FTSE Indexes Surge
Market Reaction to US-Iran Peace Deal Prospects
May 6 (Reuters) - The main UK indexes jumped more than 2% on Wednesday, aided by expectations of a U.S.-Iran deal after a months-long conflict, which has pushed energy prices sharply higher and stoked concerns of inflationary pressures.
The blue-chip FTSE 100 index rose 2.4% by 1055 GMT, while the midcap FTSE 250 also climbed 2.6%, touching its highest level in two weeks.
Global Market Movements
• Global stocks rallied and oil prices slumped about 8% after reports said the United States and Iran are closing in on an agreement on a one-page memorandum to end the war in the Gulf.
Sector Performance
Energy Sector
• All the major UK equity subsectors, barring energy, were higher. The FTSE 350 energy index fell almost 4%, tracking lower crude prices. [O/R]
Other Key Sectors
• Other economically sensitive sectors, including metal miners, banks, travel and leisure and housing, all rallied.
Monetary Policy and Economic Indicators
Interest Rate Expectations
• Traders reduced their bets of interest rate increases from the Bank of England this year, pricing in 50 basis points of hikes by the end of 2026 compared to the more than 60 bps of hike seen on Tuesday.
Inflation and Cost Pressures
• British services firms last month reported the sharpest acceleration in cost pressures in three-and-a-half years as the Iran war drove up prices for fuel and raw materials, a closely watched survey by S&P Global showed.
Political Developments
Upcoming Local Elections
• Key local elections on Thursday could see Prime Minister Keir Starmer's Labour Party suffer heavy losses following a string of scandals and criticism that the party has failed to deliver the improvement in living standards.
Leadership Concerns
• Investors will be on guard for any signs that Starmer might be replaced.
Company Highlights
Diageo
• Diageo jumped 5.2% after the spirits maker beat third-quarter sales forecasts.
Next
• Next rose 2.7% after the clothing retailer said it would mitigate cost increases linked to the Iran war with modest price rises in some overseas markets, as it posted better-than-expected first-quarter sales.
Reporting Credits
(Reporting by Sruthi Shankar in Bengaluru; Editing by Shinjini Ganguli)
