Stocks dip as oil prices continue pullback on hopes of US-Iran peace deal
By Lawrence Delevingne and Sophie Kiderlin
May 7 (Reuters) – U.S. and European stocks dipped on Thursday while oil prices slid again on optimism for a U.S.-Iran peace deal, even as the fate of the critical Strait of Hormuz appeared unresolved.
On Wall Street, major stock indexes pulled back slightly from the previous session’s multiple records on strong chipmaker earnings. The S&P 500 fell 0.3%, the Nasdaq Composite was little changed, and the Dow Jones Industrial Average dipped 0.5%.
The United States and Iran are edging toward a limited, temporary agreement to halt their war, sources and officials said on Thursday, with a draft framework that would stop the fighting but leave the most contentious issues unresolved.
Europe’s STOXX 600 was 1.1% lower, having jumped 2.2% on Wednesday, while MSCI’s broadest index of Asia-Pacific shares outside Japan hit a fresh all-time high. It was last up 1.6%. Japan’s Nikkei crossed 62,000 for the first time as trading resumed after an extended holiday weekend.
While the Middle East situation was uncertain, “the momentum is going in a good direction” and markets had taken note of it, Lombard Odier chief economist Samy Chaar said.
“So the oil price is down from its highs, which is obviously relieving pressure on yield curves and bond yields, and that is great news for equity valuation and makes currencies move a bit,” he said.
A strong earnings season and a relatively robust macroeconomic environment added to a positive market mood, Chaar added.
MSCI’s All-Country World Index was little changed, but still around record highs.
OIL BELOW $97 A BARREL
Brent crude fell about 1% to $100.39 a barrel, having tumbled nearly 8% on Wednesday.
Even after that slide, Brent is still around 40% above its late-February level, when the conflict began, while 10-year Treasury yields have surged – a reminder of the strain higher energy costs continue to put on the global economy.
On the day, 10-year Treasury yields were last down by 1.8 basis points to 4.378%.
Nick Twidale, chief market strategist at ATFX Global, said the market was wrestling with execution risk, “both in terms of whether a deal is finalised and how quickly disrupted flows would normalize even if it is.”
Rocketing oil prices whacked global markets in March but a fragile ceasefire and prospect of a deal have spurred a risk-on rally since April that has been fuelled by strong tech earnings reports.
S&P COMPANIES SET FOR ROBUST PROFIT GROWTH
S&P 500 companies are on track for their strongest profit growth in more than four years, while blowout results from Samsung, SK Hynix and TSMC have reinforced the upbeat tone in Asia.
