The rollercoaster, Iranian-style, continues in the markets. Oil fell sharply yesterday after Iranian state television reported the existence of a provisional peace memorandum of understanding that would allow shipping through the Strait of Hormuz to return to normal within a month of taking effect, under the supervision of Tehran and Oman. The United States swiftly denied the report, before fresh skirmishes were reported between the belligerents, fuelling renewed tension in the region and a rebound in oil prices. Brent, which had fallen 6.5% on Tuesday after the Iranian television rumour, is up 3% this morning.

I have no degree in geopolitics, although long experience on a local council does teach you a great deal about human weakness. So I will not try to judge who is bluffing more convincingly, Iran or the United States. But every day that passes with oil significantly more expensive than it was six months ago increases the risk of macroeconomic spillovers, as everyone has clearly grasped. Away from equity markets, which remain mesmerised by the billions being poured into AI, there is plenty of friction in the financial system. The June monetary policy meetings will show just how worried central bankers have become. Needless to say, the first signs of progress at Hormuz before those meetings would greatly help monetary authorities get a clearer view. The ECB will announce its decision on 11 June, the Banks of Japan and Australia on 16 June, the Fed on 17 June and the Bank of England on 18 June. That leaves roughly three weeks for the situation in the Gulf to settle down.

In the meantime, the latest US inflation indicators are worrying. The next reading comes with April PCE inflation, due early this afternoon. Since we have a little room, given that the financial news of recent days has been a rerun of what came before, and believe me, finding a fresh angle at the moment is no easy task, here is a brief digression: why do finance types insist on using PCE inflation rather than the usual inflation measure? PCE inflation is the personal consumption expenditures price index, and it is the inflation gauge the Federal Reserve watches most closely when setting monetary policy. Two technical differences explain why. First, PCE covers a broader basket of spending, notably including healthcare costs paid by employers and Medicare, which are not included in CPI. More importantly, it is a dynamic indicator because its weightings adjust continuously to reflect the substitutions consumers actually make when prices move. It captures what is happening more quickly than CPI inflation, and it is less volatile. That is why the Fed likes it: it gives a good sense of what the sacrosanct American consumer is really experiencing.

On the corporate front, last night brought a fresh batch of US technology earnings from companies with non-calendar financial years. Everyone was at pains to show they are on the right side of AI, but the undisputed star of after-hours trading was Snowflake, whose shares surged 37%. The group managed to show that it remains a preferred entry point for customers through its own AI solutions, and that it can make money from those tools even if the cost of using the underlying engines rises. By contrast, earnings from Marvell, HP Inc and Salesforce left investors unmoved. Salesforce even cut its guidance, without doing much to convince the market about its prospects in an AI-led world. Earlier, equity indices had closed higher in Europe and flat in the United States, as some technology stocks paused for breath. Even so, the Dow Jones managed to notch up a record close.

In Asia-Pacific, the rebound in oil took its toll this morning. All markets are lower, from a 0.2% drop in India to a 2.2% decline in Hong Kong. Korean technology stocks have resumed their decline. The MSCI Asia Pacific index is down 1.2%. US futures and European early indicators are firmly in the red, as investors wait for the next twist in the Middle East.

Today's economic highlights:

See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,387.75
  • Crude Oil (BRENT): US$94.96
  • United States 10 years: 4.52%
  • BITCOIN: US$72,866.8

In corporate news:

  • PPHE Hotel Group has received an indicative takeover proposal from Fattal Hotel Group.
  • EPE Special Opportunities raises GBP4.8 million from a partial sale of Luceco shares.
  • BP plc's ousted chair Manifold has hired law firm Mishcon de Reya, according to sources.
  • Uber acquires a further stake in Delivery Hero to increase its ownership.
  • Deutsche Bank holds its first in-person annual general meeting since 2019.
  • Iberdrola launches a battery project in Spain to boost energy storage.
  • Ferrari addresses criticism of its foray into electric vehicles with a new strategy.
  • Aegon proposes an amendment to its articles of association ahead of its move to the United States.
  • Banco Comercial Português receives the green light for a €407.5 million share buyback programme.
  • TeraGo deploys a private Ericsson 5G network at the McMaster Manufacturing Research Institute.
  • Bayer is facing a lawsuit over alleged monopoly practices in the US market for GM maize seeds.
  • Adyen announces the departure of its Chief Financial Officer, Ethan Tandowsky.
  • Italgas appoints Pierre La Tour as Chief Financial Officer.
  • Avolta secures 12-year concessions at Norfolk Airport.
  • CD Projekt is putting a short-term incentive scheme for its executives to the AGM.
  • Banco de Sabadell adjusts the floor price of its convertible bonds to €1.042 following the payment of a special dividend.
  • Snowflake soars 37% in after-hours trading following its quarterly results.
  • Salesforce falls 1.2% in after-hours trading following its quarterly results.
  • Marvell falls 1.4% in after-hours trading following its quarterly results.
  • Synopsys falls 2% in after-hours trading following its quarterly results.
  • FedEx Freight is set to join the S&P 500 on 29 May, replacing EPAM Systems.
  • Microsoft has won a Pentagon contract for enterprise software worth $9.7 billion.
  • Amazon has entrusted its healthcare division to Amwell co-founder Ido Schoenberg. Furthermore, the group has given the green light to three AI-generated children’s series.
  • Meta is launching paid subscription plans for Instagram, Facebook and WhatsApp.
  • GE Aerospace is seeing demand for engine maintenance hold up despite rising kerosene prices.
  • Wells Fargo anticipates double-digit growth in corporate and investment banking and trading.
  • NextEra shareholders reject the proposal to align with the Paris Agreement.
  • Boeing has secured an $854.7 million contract extension with the Navy for P-8A aircraft.
  • Denso is stepping up its R&D to reduce its reliance on rare earths in its automotive components.
  • Toyota Motor is recalling 82,000 vehicles in the US due to a software fault in the dashboard display.
  • Today’s key earnings releases: Costco, Dell, Autodesk, NetApp, SSE plc, Johnson Matthey Plc, HarbourVest Global Private Equity Ltd., Finsbury Growth & Income Trust PLC

See more news from UK listed companies here

Analyst Recommendations:

  • Greatland Gold: UBS initiates a buy recommendation with a target price of AUD 16.50.
  • Mondi Plc: Morgan Stanley maintains its underweight recommendation and reduces the target price from GBX 760 to GBX 700.
  • Convatec Group Plc: Goldman Sachs maintains its buy recommendation and reduces the target price from GBX 310 to GBX 290.
  • Big Yellow Group Plc: Morgan Stanley maintains its underweight recommendation and reduces the target price from GBX 1000 to GBX 950.
  • Quilter Plc: RBC Capital maintains its outperform rating and raises the target price from GBX 220 to GBX 225.
  • Investec Plc: UBS maintains its buy recommendation and raises the target price from GBX 760 to GBX 800.
  • Johnson Service Group Plc: BNP Paribas maintains its outperform rating and raises the target price from GBP 1.80 to GBP 1.90.
  • Hill & Smith Plc: Jefferies maintains its buy recommendation and raises the target price from GBX 2760 to GBX 3250.
  • L'oréal: Berenberg upgrades to buy from hold and raises the target price from EUR 374 to EUR 435.
  • Infineon Technologies Ag: Morgan Stanley maintains its overweight recommendation and raises the target price from EUR 63 to EUR 91.
  • Basf: Citi maintains its buy recommendation and reduces the target price from EUR 61 to EUR 58.
  • Airbus Se: Morgan Stanley maintains its overweight recommendation and reduces the target price from EUR 230 to EUR 227.