- FTSE 100 opens in positive territory ahead of the long Easter weekend, boosted by another wave of optimism on Wall Street.
- Confirmation that the UK entered a technical recession at the end of last year hasn’t soured the mood.
- US indices are surging higher despite fresh warnings about the risks ahead from the Bank of England, while a key Fed policymaker cautions that high interest rates may linger.
- Brent Crude prices edge up amid geopolitical tensions and lower US stockpiles than initially measured.
- The credits are rolling on the epic fight between Disney and Governor Ron DeSantis
- Cocoa prices hover at record highs, as chocolate lovers brace for higher prices in the months to come.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The FTSE 100 has set off on solid ground, lifting in early trade on the last day before the long Easter break, helped by another wave of enthusiasm on Wall Street. Confirmation that the UK entered recession at the end of last year hasn’t soured the mood. The 0.3% contraction in the final three months followed a 0.1% dip in the third quarter, confirming two back-to-back quarters of negative growth. But the ONS snapshot also shows that savings remained relatively high and real household disposable incomes increased in the last quarter of the year, adding to hopes that consumers resilience has been rising and that the recession will have been a super-short one. US stocks have scaled fresh peaks, with the S&P 500 reaching new highs, with the recent rally more broad-based. Optimism continues to swirl about the prospects for lower interest rates on the horizon and better prospects for the world economy, even though warnings are piling up about the potential risks ahead.
The Bank of England has cautioned that asset prices are stretched, and markets are at risk of a sharp correction, with repercussions for households, if growth forecasts are upset by high interest rates lingering for longer or a fresh deterioration in geopolitical relations. Central bankers are also urging caution, with Fed Governor Christopher Waller stressing there should be no rush to cut interest rates and that a more restrictive policy could be in place for longer than previously thought. Hawkish tones have also come from Bank of England policymakers Catherine Mann who warned that markets were pricing in too many rate cuts for the current year. Investors have largely been shrugging off warnings from institutions and policymakers about the risks ahead, and irrational exuberance keeps pushing up valuations on Wall Street, with the Trump Media and Technology Group making further big strides helped by MAGA supporters buying power. However, Nvidia has slipped back, with a few questions creeping in about its super-high valuation.
The Bank of England’s warning about the risks ahead, should further geopolitical conflicts erupt, comes as hopes for a ceasefire in the Middle East slip further away, reigniting fears about an escalation of tensions. Israel has begun targeting sites in Rafah, and concerns are growing about a wider offensive. Houthi rebels have been continuing to hit ships in the Red Sea, with no relief in sight for global firms having to re-route goods long distances. Russia is also rumoured to be gearing up for a large attack along the Ukrainian front line. Oil prices have shifted higher as tensions remain high with eyes on potential supply issues, with Brent Crude rising towards $86 a barrel. On the demand side, a report from the US Energy Information Administration pointed to a smaller weekly increase in stocks compared to data from an earlier report from the American Petroleum Institute.
The credits are rolling on the epic fight between Disney and Governor Ron DeSantis over the development of its Orlando park complex. The legal twists and turns have finally come to an end with a truce of sorts, with both sides reaching a settlement over control of the special district which includes the Disney world theme parks. The company has said it will open a new chapter of constructive engagement and there will be relief that Disney won’t be distracted by ongoing lawsuits, particularly in election year. However, news of the truce doesn’t look set to move the share price much, with investors much more interested in the global picture for the company. Disney’s made big gains in recent months with the share price up by 33% year to date, as investors have cheered its progress in cutting costs but also have welcomed the investment in Fortnite owner Epic Games, which potentially unlocks a highly lucrative new revenue streams.
As we head into the long Easter weekend, and a chocolate extravaganza, eyes are being drawn to the continual march upwards in cocoa prices which threaten to make products more expensive. Cocoa futures, trading in London, hit £8,222 a metric ton, more than $10,373. With the commodity scaling to fresh peaks it will cause a dilemma for big confectioners. Many will have hedged prices, but those are likely to run out later this year or next. With prices not expected to dip significantly due to production issues in West Africa, caused by poor harvests and financing issues among producers, consumers may have to brace for fresh price hikes or fresh bouts of shrinkflation as manufacturers look at ways to support margins. However, some big consumer goods giants have already been witnessed declines in volumes with shoppers baulking at recent price hikes nor are they are unlikely to be impressed by another Willy Wonka style shrinking act, if some bars are reduced again in size.”
