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Highlights
FTSE 100 futures point to a stronger open amid easing geopolitical tensions
Brent crude and gold retreat as market de-escalates Middle East risks
Dovish Fed commentary reinforces expectations for upcoming rate decisions
The FTSE 100, representing London's large-cap equities, is expected to open on a positive note Tuesday, buoyed by signs of geopolitical de-escalation in the Middle East and a shift in market risk sentiment. Global equities are broadly firmer, with energy prices pulling back and investors digesting central bank commentary out of the US.
Market futures suggest the index may recover ground lost in Monday's session, with easing conflict signals between Iran and Israel supporting optimism in European trading hours.
Mixed Messages on Iran-Israel Ceasefire
Tensions in the Middle East appear to be cooling following mixed reports regarding a ceasefire between Iran and Israel. While Iranian state media suggested a truce had been enforced, Iranian officials signalled ongoing hostilities and conditional cessation of military activity.
The recent developments follow reports of rocket fire, retaliatory action, and airspace closures in the region. Despite the initial uncertainty, traders interpreted Iran’s actions as measured, contributing to reduced fears of escalation.
Oil and Gold Prices Retreat as Risk Premium Shrinks
Brent crude prices saw a significant pullback in early Tuesday trade, reflecting reduced supply disruption concerns in the energy markets. Similarly, gold prices softened, tracking the unwinding of safe-haven demand as markets reassessed the geopolitical backdrop.
Energy shares may underperform in the session due to weaker oil benchmarks, while broader equity indices are likely to benefit from a stabilising macro environment and improving risk appetite.
Fed Comments Spark Speculation Around July Rate Decision
Supportive commentary from US Federal Reserve officials added to the positive tone. Federal Reserve Vice Chair for Supervision Michelle Bowman indicated that a rate cut could be appropriate as early as July if inflation dynamics remain contained.
Her comments echoed those from fellow Fed Governor Christopher Waller, reinforcing the narrative of a shift towards policy easing. These dovish signals contributed to improved market sentiment globally and bolstered interest rate-sensitive sectors.
Equity Indices Rally Across Asia-Pacific
Asian markets recorded gains across the board on Tuesday. Japan’s Nikkei 225, Australia's S&P/ASX 200, China’s Shanghai Composite, and Hong Kong’s Hang Seng Index all advanced in response to reduced geopolitical tension and supportive global cues.
Markets across Asia broadly aligned with Wall Street’s upbeat close, with cyclical sectors like technology and industrials leading gains.
Currency and Bond Market Movements
In currency markets, the pound strengthened against the US dollar, while the euro also edged higher. The US dollar eased slightly against the yen. Meanwhile, US Treasury yields widened marginally as market participants assessed inflation trends and potential monetary policy adjustments.
Corporate Updates and Data on the Radar
On the local corporate front, a trading update from Bunzl is expected on Tuesday. Globally, attention will focus on US consumer confidence data scheduled later in the day, which could influence near-term economic sentiment and market direction.
