Investors celebrate US-Iran deal
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Good morning from the Financial Times. Today is Tuesday, June 16th, and this is your FT News Briefing. Investors celebrated the news of a U.S.-Iran deal, and hedge funds are downbeat on European carmakers. Plus, we'll take a look at how Russia is recruiting unwitting foot soldiers in Europe.
This is a sign of a gig economy, of people being recruited online, often paid via crypto, to do actions in the real world.
I'm Mark Filippino, and here's the news you need to start your day.
Global equities rallied and oil prices fell yesterday. That's after an agreement to reopen the Strait of Hormuz was announced over the weekend.
What impact does the US-Iran deal have on global equities?
Investors are betting the U.S.-Iran deal will reverse a surge in energy prices due to the conflict. But with inflation riding high, how long could it take for lower energy prices to actually make a difference? Here with me now is the FT's U.S. Markets Editor, Kate Duguid. Hi, Kate. Hi. So why are investors feeling so optimistic about this deal?
So I think that the reason why investors are optimistic about this deal is because we've heard from Iran as well as from the United States. Previously, we had kind of only been hearing from President Trump and the White House, and we had not been hearing from Tehran. So I think that that's the real reason that investors are taking this seriously. The reason that they think that energy prices are probably going to fall as the Strait of Hormuz is reopened. And Iran goes about rebuilding some of the infrastructure that was destroyed.
What does this mean for inflation overall? I mean, Kate, you know, how long could this change take to feed through the economy, especially given that the head of the world's biggest tanker operator said that ship owners probably won't go back through the strait for weeks?
So I think that what you're hinting at, which is that we might have inflation for longer than just, you know, that these inflationary effects might persist, is absolutely right. I think that we will continue to see higher energy prices for a little while, given that As you mentioned, the street itself is not completely open yet, but also because like a lot of critical infrastructure has been damaged and will take time to rebuild. You know, there are a number of different commodity markets that this is going to affect. One thing that we saw is U.S. wholesale inflation rose dramatically in April. And so that tends to be a predictor of inflation to come in consumer prices. It hasn't quite shown up in the CPI data yet, which has risen, but it's only been because of energy.
Core prices have not really risen very much. And the wholesale inflation data kind of suggests that it might still be to come.
Kate, given the inflationary environment that we're in, I want to ask you about central banks because the Federal Reserve and the Bank of England are meeting this week. The European Central Bank met last week and raised rates. Could we see other central banks raise rates given what's going on with inflation?
I don't think that we should expect a rate hike from either the BOE or the Federal Reserve. Core inflation has not risen fast enough to justify an immediate hike. But what I will say is that I do think that the Fed statement will likely remove what's called the easing bias. And so that is an indication that the Fed is sort of is not looking to cut interest rates anymore, which is what was expected at the beginning of this year. At the Bank of England, Governor Bailey has signaled no immediate rush to raise rates despite higher inflation. But we are seeing splits emerging on the Monetary Policy Committee. And I think that'll be interesting to watch. Certainly, I think from both banks, we could expect to see an interest rate hike later on this year.
Kate, as you've watched investors navigate this conflict and the energy crisis that came out of it, what's been your takeaway on investor thinking and behavior?
We have seen investors continue to assume that Trump will sort of back down from his most radical claims. One of the things that's been interesting to see has been that the market tends to rally and pretty strongly when there's good news, when there's news about a potential deal or progress in talks.
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