Category: Market News

Gold prices were little changed on Monday as markets assessed the impact of escalating tensions between the United States and Iran while weighing expectations that higher oil prices could keep U.S. interest rates elevated for an extended period.

At 22:17 ET (02:17 GMT), XAU/USD edged 0.1% higher to $4,020.63 an ounce, while Gold Futures advanced 0.8% to $4,030.2. Silver outperformed, with XAG/USD rising 1.8% to $56.97 an ounce, while platinum gained 0.2% to $1,598.45.

Rising oil prices revive inflation worries

Gold remained under pressure after losing more than 2% last week as investors questioned whether the renewed military conflict in the Middle East could slow the recent progress in reducing inflation.

Brent crude moved back above $90 a barrel after military activity between the United States and Iran intensified during the weekend. The latest escalation included an attack on a major oil installation in Kuwait and strikes involving vessels transiting the Strait of Hormuz, increasing concerns over the security of global energy supplies.

Tehran said the ceasefire between the United States and Iran had effectively collapsed, raising the possibility of prolonged disruption along one of the world’s busiest oil shipping routes.

As the conflict enters its fifth month, higher energy and commodity prices continue to influence market sentiment, while uncertainty surrounding U.S. President Donald Trump’s strategy toward Iran remains a key focus for investors.

Interest rate expectations continue to drive gold

Although recent U.S. inflation and employment data have pointed to moderating economic conditions, markets remain focused on whether rising energy prices could delay the Federal Reserve’s progress in bringing inflation back to target.

Higher oil prices risk keeping inflation elevated, increasing the likelihood that the Federal Reserve maintains restrictive monetary policy. Higher interest rates generally strengthen the U.S. dollar and Treasury yields, reducing the attractiveness of non-yielding assets such as gold.

ANZ analysts said last week’s escalation in the Middle East briefly pushed market expectations for a Federal Reserve rate increase at the July 29 meeting to around 40% before easing to roughly 10%, highlighting the close relationship between gold prices and interest rate expectations.

The bank added that the bar for another Fed rate increase remains high and continues to expect policymakers to leave rates unchanged this year. It believes the central bank will likely look through higher energy prices unless they trigger broader second- and third-round inflationary effects. ANZ also expects gold to find support between $3,800 and $4,000 an ounce as expectations for additional policy tightening continue to ease.

Gold has remained close to the psychologically important $4,000 level in recent weeks after falling 14% during the second quarter, its weakest quarterly performance since 2013, illustrating how monetary policy expectations continue to outweigh traditional safe-haven buying.

Eurozone government bond yields moved higher on Monday as rising oil prices and renewed geopolitical tensions strengthened expectations that the European Central Bank (ECB) will maintain a restrictive monetary policy stance for longer.

Borrowing costs increased across both short- and long-term maturities, extending the upward trend seen earlier this month as investors reassessed the inflation outlook.

Germany’s 10-year Bund yield, the benchmark for the euro area, climbed to around 3.14%, remaining close to its highest level since late May.

Shorter-dated bonds also came under pressure, with the yield on the rate-sensitive two-year German Bund rising to approximately 2.79%, reflecting growing expectations that interest rates could remain elevated for an extended period.

The latest move in bond markets comes as the ongoing conflict involving the United States and Iran continues to fuel concerns over global energy supplies. Brent crude gained a further 2.2% on Monday, increasing fears that higher energy costs could feed through into consumer prices across the eurozone.

Investors are increasingly concerned that a sustained rise in oil prices could complicate the ECB’s efforts to bring inflation back towards its target, prompting markets to factor in a more cautious approach to future rate cuts.

Attention is now turning to Thursday’s ECB policy meeting. While the central bank is widely expected to leave its deposit facility rate unchanged at 2.25% following June’s 25-basis-point increase, investors will closely watch President Christine Lagarde’s comments for guidance on the policy outlook.

Market participants expect the ECB to reiterate its data-dependent approach while signalling that further policy tightening remains possible if inflationary pressures, particularly those linked to energy prices, continue to build.

European wholesale natural gas prices climbed sharply on Monday, reaching their highest levels since late March as renewed geopolitical tensions in the Middle East heightened concerns over potential disruptions to global liquefied natural gas (LNG) supplies.

The Dutch front-month gas contract, Europe’s benchmark, rose 3.45% during mid-morning trading, while the equivalent UK wholesale gas contract advanced 3.52%, reflecting growing anxiety across regional energy markets.

The latest rally followed reports that a commercial tanker caught fire after an attack in the Strait of Hormuz, one of the world’s most strategically important shipping routes for energy exports.

Around one-fifth of global LNG shipments pass through the Strait of Hormuz, with cargoes primarily originating from major Gulf producers. Any threat to the passage is closely monitored by European energy markets, given the region’s increasing dependence on imported LNG.

Following the sharp reduction in Russian pipeline gas supplies in recent years, Europe has become significantly more reliant on seaborne LNG to meet residential heating demand and support industrial activity.

The renewed maritime tensions also coincided with a 2.2% rise in global crude oil prices, adding further upward pressure to oil-linked gas contracts.

Although LNG cargoes continue to transit the Strait of Hormuz under heightened security measures, traders said the market is increasingly pricing in geopolitical risk. Reports of active security incidents have driven insurance costs sharply higher, with elevated war-risk premiums feeding directly into European gas prices.

Shares in Segro Plc (LSE:SGRO) declined on Monday after Prologis Inc (NYSE:PLD) revealed that the UK logistics property company had rejected its latest £13.5 billion takeover proposal.

Segro’s shares fell 1.7% to 882 pence in London trading, underperforming the FTSE 100, which was down 0.4% during the session.

Prologis said its revised offer, submitted on 16 July, valued Segro at approximately £13.5 billion, or around 993 pence per share. The proposal consisted of 0.0890 newly issued Prologis shares for each Segro share, together with a partial cash alternative worth up to £2.7 billion.

According to Prologis, Segro’s board unanimously rejected the proposal the following day. The latest approach was the third made by the U.S. logistics real estate group since discussions began in June, after an earlier all-share proposal was also turned down.

Analysts at Jefferies said the revised offer increases pressure on Segro’s board, noting that the proposal values the company at roughly 993 pence per share. This represents a premium of approximately 9.7% to Segro’s pro forma June 2026 net asset value and 33.8% above the company’s unaffected share price before the takeover approach became public.

Jefferies added that Prologis continues to question Segro’s standalone valuation assumptions while highlighting its own operational performance and expanding data centre development pipeline as part of the rationale for the proposed transaction.

The brokerage also noted that Prologis faces a key deadline under the UK Takeover Code. By 22 July, the company must either announce a firm intention to make an offer for Segro or withdraw its interest, unless the UK Takeover Panel agrees to extend the timetable.

If completed, the transaction would represent the largest takeover involving a publicly listed European real estate company. While Segro has rejected each of Prologis’ proposals to date, the U.S. group continues to argue that combining the two businesses would create greater long-term value for shareholders.

Shares in Computacenter PLC (LSE:CCC) climbed on Monday after Berenberg upgraded the IT services provider to “buy” from “hold” and significantly increased its price target to 5,300 pence from 3,450 pence. The broker said the company is well placed to deliver earnings ahead of current market expectations.

Computacenter’s shares rose 3.6% to 4,746 pence during London trading, comfortably outperforming the FTSE 100, which declined 0.3% over the same period.

Berenberg said its more optimistic outlook followed Computacenter’s first-half trading update, which highlighted stronger-than-expected demand from hyperscale customers in North America, continued solid growth in the UK and improving trading conditions in Germany.

The broker expects adjusted profit before tax for the first half to reach around £163 million, ahead of the market consensus of £155 million. It also noted that management now expects full-year results to be comfortably above existing market forecasts.

Reflecting the stronger outlook, Berenberg increased its gross profit forecasts by 4% for 2026, 5% for 2027 and 6% for 2028. The brokerage also raised its adjusted operating profit estimates by 17% for 2026, 15% for 2027 and 17% for 2028.

Berenberg now forecasts adjusted operating profit of £349 million for 2026, compared with the previous consensus estimate of approximately £318 million. The broker said the upgrade reflects expectations that a larger proportion of gross profit will convert into operating earnings, supported by stronger operational leverage.

Looking ahead, Berenberg believes continued momentum in North America and the UK, combined with an improving performance in Germany, could drive further earnings growth. It also highlighted management’s long-term objective of achieving a 30% operating profit-to-gross profit conversion rate as a positive indicator for future profitability. However, the broker cautioned that any slowdown in hyperscale data centre investment, particularly from Meta, remains the principal risk to the investment case.

Shares in Ryanair Holdings Plc (LSE:0A2U) fell more than 7% on Monday after the low-cost airline reported first-quarter net income that missed market expectations and warned that second-quarter fares are now likely to be lower than previously forecast.

The airline generated net income of €538 million during the quarter, a decline of 34.4% from €820 million in the same period last year. The result fell short of the consensus analyst forecast of €579 million by 7.1% and was 15.8% below Morgan Stanley’s estimate of €639 million.

Morgan Stanley said the earnings shortfall was largely driven by weaker revenue rather than costs. Non-fuel costs per passenger came in 1.5% below consensus estimates and matched the broker’s expectations, while fuel costs were broadly in line with market forecasts but around 6% higher than Morgan Stanley had anticipated.

Quarterly revenue increased 1.1% year-on-year to €4.43 billion. Although this represented modest growth, it was still below the consensus estimate of €4.48 billion by 1.1%. Revenue, however, came in slightly ahead of Morgan Stanley’s forecast of €4.38 billion.

According to Morgan Stanley, the main weakness came from scheduled revenue per passenger, which was around 3% below consensus after average fares declined 6% year-on-year. That fall was steeper than the mid-single-digit decline Ryanair had previously guided.

Despite the weaker quarter, Ryanair maintained its full-year traffic forecast, expecting passenger numbers to rise 4% to 216 million, broadly in line with both consensus and Morgan Stanley forecasts. However, the airline no longer expects unit cost inflation to increase by a mid-single-digit percentage, instead stating that the outcome will depend on movements in unhedged fuel prices. Analysts had previously been forecasting unit cost growth of around 1% to 2%.

“Principal cause of this was the price of our 20% unhedged fuel doubled in the quarter and fares fell 6%, primarily, we think, due to the impact of the Middle East conflict and the first part of Easter falling into our prior year Q4,” group chief executive Michael O’Leary said on the earnings call.

Average fares fell 6%, exceeding both the company’s previous guidance and analysts’ expectations. Ryanair attributed the weakness to softer booking trends linked to geopolitical tensions in the Middle East, which encouraged customers to delay making travel reservations until closer to departure.

The airline’s load factor remained unchanged at 94%. O’Leary also provided an update on Boeing’s MAX-10 programme, stating that certification is expected “sometime in September or October of this year,” while adding that Boeing remains on schedule to deliver the first 15 aircraft during spring 2027.

Group chief financial officer Neil Sorahan highlighted the widening cost advantage Ryanair continues to hold over competitors, saying, “If we look at our two nearest competitors, before COVID, Wizz were 26% behind Ryanair. Now that’s over 81%, we would expect that to continue to grow over the next number of quarters and years.”

Sorahan added that the unit cost gap with easyJet has also widened significantly, increasing from around 70% before the pandemic to approximately 150%. On fuel hedging, O’Leary said Ryanair has hedged 15% of its fiscal 2028 fuel requirements at $85 per barrel, while 90% of fiscal 2027 operating expenses are hedged at $1.15 to the euro and 30% of first-half fiscal 2028 operating expenses are hedged at $1.20.

The company also confirmed that 60% of its order for 150 Boeing MAX-10 aircraft has been hedged against euro-dollar exchange rate movements at just above 1.23.

Ryanair chose not to provide full-year net income guidance and did not reaffirm its previous outlook for unit cost inflation, citing uncertainty over second-half trading conditions, volatile jet fuel prices, approximately €300 million of additional European Union environmental taxes, rising maintenance expenses and higher employee pay costs.

Looking ahead, the airline expects second-quarter fares to be modestly lower than a year ago, rather than broadly flat as previously indicated. O’Leary described the anticipated decline as “something low to mid single digits” and said first-half performance would depend heavily on late bookings throughout August and September, despite healthy demand for summer 2026 travel.

Following the results, Morgan Stanley said it expects market consensus for full-year net income to fall from approximately €2.1 billion to around €1.9 billion. Nevertheless, the broker maintained its “overweight” recommendation on Ryanair with a €27.60 price target, citing strong summer demand and reduced reliance on fare discounting despite expectations for slightly weaker second-quarter pricing.