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Updated Tuesday 23rd April 2024

HL commentary as it happens

Keeping you updated on all the day's important financial market events and news

Tuesday 23rd April


Jeremy Hunt has less wiggle room to offer treats to voters

This snapshot of the UK’s public finances gives Chancellor Jeremy Hunt even less opportunity to offer a windfall of tax breaks ahead of the General Election. The magic money tree is increasingly thirsty, stuck in a drought caused by increased spending on public services and benefits. Although the amount borrowed dropped sharply compared to last March, on a 12-month basis the picture is less pretty. The government has had to borrow £6.6 billion more over the last financial year than forecast by the Office for Budget Responsibility.

Although tax receipts came in higher than last March, and there were large reductions in energy support scheme costs, and the amount of interest due on the debt, this situation looks set to deteriorate. Fewer interest rate cuts are now priced in by financial markets, which is likely to raise expectations about the costs of borrowing for the government.

Mr Hunt has been reportedly mulling plans to cut National Insurance for this third time in a row this year and raising the threshold for stamp duty. But he’s balancing on an increasingly precarious branch as he tries to shake down treats for voters.


Oil price strengthens ahead of US economic data

Despite a slight easing geopolitical risk, the oil price has tightened slightly at $87.3 a barrel. This follows an earlier easing, and also includes the impact of US economic data later on. Flash PMI will help map the demand picture as it will feed into the Federal Reserve’s appetite, or lack thereof, to cut interest rates.


FTSE 100 reaches a new record as tensions in Middle East ease slightly

The FTSE 100 has landed another record high, after bulldozing previous records yesterday. The market’s sprits are being lifted by an initial easing of tensions in the Middle East, as well as preparations for a very busy week for corporate news. Not all the updates are expected to be overly positive, big tech kicks off with Tesla results this evening. The tech-darling’s valuation has come under renewed pressure on news of price cuts, and its dramatic efforts to boost demand means there’s an element of trepidation about the earnings release. Another important consumer bellwether is due to report today, with Visa in the spotlight. Despite growing pressure on lower earners in the US, the overall picture looks set to show resilience. Visa’s expected to post increased profit as consumers spend more on dining out and travel.

Although there are some conflicting messages in the market, the overall sentiment has improved. Across the pond in the US, the main indices have picked up, and the UK’s followed suit. The mood can of course change at short notice, especially when so much hinges on a continuation of the calmer environment in the Middle East – which is by no means guaranteed. Secondary to that, it will be corporate outlook statements over the next couple of days that have the ability to move the dial in this uncertain period.

Markets today
Prices delayed by at least 15 minutes

Monday 22nd April


FTSE 100 close to record high helped by an easing of geopolitical tensions

London's blue-chip index has had a surge of power as heightened geopolitical tensions have eased, and investors assessed the brighter prospects for the UK economy, with interest rate cuts spied on the horizon. It’s tantalisingly close to breaching the all-time intraday high of 8,047 and it’s been trading above its record closing value of 8,014.

Gold, a safe haven asset, has slipped back slightly in the absence of fresh attacks by Iran or Israel. However, the precious metal is still hovering close to record highs. Brent Crude has also fallen back slightly as the focus turns to the prospects of weakening demand in the US if high interest rates linger for longer. However, it’s not had much effect on the share prices of the big energy giants. Tensions are still simmering in the Middle East and there are ongoing concerns about the potential that they could flare up again, causing fresh disruption to supplies.

With growth in the UK not shooting the lights out, and inflationary pressures showing signs of easing, there is still optimism around about the prospect of interest rate cuts coming later in the summer, which appears to have help the FTSE 100 climb higher. As lower borrowing costs are forecast later this year, amid a more slightly more positive outlook for the economy, housebuilders have also headed sharply higher amid hopes that stronger demand will return for new homes.


Gold and oil prices dip back as situation calms in Middle East

Gold prices slid away from record highs as the upwards pressures which have pushed the precious metal higher eased. The calmer re situation in the Middle East, combined with expectations that the Fed will be slow to cut interest rates, means gold is less attractive for some investors than yield-bearing assets like government bonds. The potential for more fractious relations has prompted some central banks to increase gold holdings to reduce reliance on US dollars as a safe-haven asset and that trend is unlikely to disappear. Oil prices have dipped back, with Brent Crude hovering around $86 a barrel, heading towards four-week lows, amid hopes that fresh supply complications in the Middle East won’t materialise. With high interest rates are now expected to linger for longer in the US, which is also adding to expectations of lower demand for energy.


US agrees funding for Ukraine amid inflation concerns

Fears of a Russian victory over Ukraine have dissipated, with the long-awaited passing of the $60.8 billion funding deal by the US House of Representatives. Chunks of funding are expected to be used imminently to bolster Ukraine’s air defences and dwindling shell reserves to repel attacks in the East. The legislation also contains $26 billion for Israel and $8.12 billion for the Indo-Pacific, including Taiwan. For now, concerns about the huge and growing US debt pile are largely on the back burner and confidence in the US administration’s ability to pay interest due remains solid, but the clamour of voices calling for spending restraint is likely to grow.

With governments bolstering their defence capabilities, military contractors are eyeing up the potential for lucrative contracts ahead. Increased spending on drones, missiles, fighter aircraft, equipment and training is likely to end up being another inflationary pressure. Eyes will be trained on the US GDP snapshot on Thursday and the personal consumption expenditures price index out this Friday, which will be super-crucial parts of the picture for the Federal Reserve ahead of its decision on interest rates due on 1 May. The data is expected to show that inflation is remaining stubborn, and now expectations for multiple rate cuts this year are fizzling out fast.


FTSE 100 rises as geopolitical tensions ease, with big tech in focus on Wall Street

The FTSE 100 has spring in its step at the start of the week, amid an easing of geopolitical tensions. The pulse of positivity comes in the absence of fresh retaliatory attacks by Israel or Iran and the US flexing its funding muscle and passing a crucial aid package for Ukraine. But some unease is set to continue about high valuations on Wall Street, following a string of falls last week. The focus is switching to earnings season kicking off, and tech giants have a lot to prove as concerns grow about the era of high interest rates continuing. With the S&P 500 dipping below the psychologically important 5,000 mark, some negative sentiment continues to bubble. The big tech earnings set to be revealed this week will have to meet great expectations to stop fresh falls on indices. Rising government bond yields are also putting stocks under pressure, with investors eyeing up the potential for higher, more stable longer-term returns offered by US Treasuries, given the already super-high valuations achieved by mega tech stocks.

Friday 19th April


Oil price spikes again as airstrike reports weigh on sentiment

The oil price is back up over $88 a barrel as Middle East tensions escalate. Some demand uncertainties still persist though, especially following weaker economic data from China. Overall this is keeping a partial lid on price gains, but that could be removed if the Israel – Iran conflict scales up.


FTSE 100 falls amid Middle East tension and disappointing retail sales

The FTSE 100 has swung to the downside today, as reports of an Israeli attack on Iran increase geopolitical uncertainty. On a more UK-specific level, retail sales were unexpectedly flat in March, according to ONS data. This was worse than expected, and included a decline in food store sales. This doesn’t bode too well for some names in the grocery industry, with corporate updates expected next week. The data also speaks to growing concerns about resilience in the wider retail sector. Mid-market names are in a very difficult position and pressure isn’t abating.

Wednesday 17th April


Oil price dips slightly as IMF warns on Middle East inflation risk

Delayed interest rate cuts in the US have seen some heat removed some demand stress from the oil price, with Brent crude trading at $89.6 dollars a barrel. The higher than forecast China GDP also masked indicators that showed a slowdown in economic activity in March, with this also loosening the price. That said, the IMF has warned that Middle Eastern conflict could result in higher oil prices for longer, and this could cloud the ability of policymakers to bring inflation down in-line with targets.


What new inflation figures mean for savers

With inflation at 3.2%, there are currently savings rates which beat inflation in every market – from easy-access to the longest fixed rate savings deals.

Easy-access rates have been particularly strong in 2024, despite having softened in March, with the top of the market falling 10 basis points. Meanwhile, one-year fixed rates stayed relatively steady in March, and we’ve actually seen two-year fixed rates rising.

As inflation comes under control, banks will price in more rate cuts, and savings deals will drop. Over the past quarter, savings rates have already fallen across the board, with the largest declines occurring in the fixed term deposit space.


Inflation edges in right direction – but too slow to inspire action

Inflation in the UK took another welcome step towards target, but interest rate cuts are remain elusively distant. The drop was widely expected and was slightly less than forecast, with prices at the pumps offsetting a slowdown in food hikes.

Although consumer prices are heading in the right direction, it’s not just the headline rate which determines Bank of England action. Policymakers scan other data, and the snapshot of stubborn wage growth out this week continues to be a concern. Unemployment may have risen but the labour market figures are considered unreliable and more people out of work isn’t yet translating into a sharp slowdown in wage increases, as there’s still a fight for talent in big pockets of the economy.

Although core inflation, which strips out volatile food and fuel prices is also cooling, slowing to 4.2%, the worry is that employers could pass on higher wage bills in the form of higher prices in the months to come. It means the interest rate may stay at a painful level for even longer than earlier forecasts, with August or September being increasingly pencilled in.

Other central banks, particularly the Federal Reserve in the United States are taking a cautious stance, staying committed to the fight against inflation. Fed chair Jerome Powell has warned that interest rates may have to linger for longer, with confidence ebbing away that the price spiral is being brought under control.