CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Oil volatile ahead of Trump Iran announcement

Article By: ,  Senior Market Analyst
May 8, 2018 1:08 PM

After gapping higher on the open after the long weekend and amid a flurry of M&A activity, the FTSE has steadily lost ground across the session. The index was flirting with breakeven as from around midday and briefly dipped into negative territory as Wall Street opened lower and investors look cautiously ahead to President Trump’s decision on the Iran nuclear deal.

M & A activity lifted the FTSE early on, with the index hitting a 14 week high of 7585 as investors cheered the £46 billion takeover deal for Shire by Japanese rival Takeda. 

After a month of to-ing and froing the deal has finally been approved by Shire’s board, in what will be the largest acquisition by a Japanese company overseas. The price of £49 per share represented a 56.9% premium to Shire’s closing price on March 27, the date prior to which Takeda revealed its interest in Shire.

Miner also started the session mixed, even after Chinese exports rebounded more strongly than expected. Usually strong data out of China, the worlds biggest consumer of metals, boosts metal prices, but this was being offset by a stronger dollar.

Trump to stay or not to stay in Iran deal?

Whilst a whirl of deal making supported the FTSE in early trade the optimism didn’t last as investors turned their attention to the White House amid fears that Trump is on the verge of withdrawing from the US – Iran nuclear pact. 

This was a deal that lifted sanctions on Iran in return for limits on the country’s nuclear programme. Trumps announcement is due at 2pm EST and we are expecting trading to be subdued with a negative bias until then.

Whilst Wall Street is trading marginally lower ahead of Trump’s announcement, oil is the big story. 

After crude charged to a 4 year high in the previous session at $70.84, today it has tanked over 2.5% amid conflicting reports on Trumps upcoming decision. 

Trump is widely expected to scrap the deal, and reimpose sanctions, including sanctions targeting Iran’s oil. 

However, confusion from a report earlier in the day has ensured oil traders have had a roller coaster ride across the session ahead of the announcement.

Potential outcomes:

Should Trump decide to abandon the Iran deal, the price of oil is expected to rally as the markets adjust to reduced oil production. 

The safe haven yen could also jump pulling USD/JPY lower. The dollar would be expected to charge higher versus other peers.

Should Trump opt to stay in the deal but remove the waiver on sanctions, this would mean that oil limits would be re imposed but with 180 day advanced warning. 

This would allow the markets time to adjust and therefore reduce the chances of a knee jerk reaction.

Finally sticking with the status quo seems unlikely but given Trump’s unpredictability its something to keep in mind. 

This scenario could oil give up some recent gains and see safe havens drop as markets breath a sigh of relief.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024