Matt Britzman, senior equity analyst, Hargreaves Lansdown: “Global stock markets look set to end a volatile week on a more positive footing, with investor sentiment showing tentative signs of recovery heading into the weekend. The FTSE 100 opened broadly flat this morning, with US markets expected to follow suit later this afternoon. While the term 'ceasefire' is used somewhat loosely, there has been enough perceived de-escalation in the Middle East to ease some of the pressure on risk assets we saw earlier in the week. The prospect of in-person talks between the US and Iran over the weekend is also helping steady nerves, offering hope that diplomatic channels remain open. Taken together, investors are becoming more comfortable that, while risks remain, the broader trajectory is moving in the right direction.
Oil prices have eased back from the highs seen earlier in the week but remain stuck in an elevated $95-100 range as supply concerns continue to dominate the outlook. The ongoing closure of the Strait of Hormuz remains the key sticking point, with President Trump warning Iran against imposing transit fees on vessels moving through the crucial shipping lane - a concern that has also been echoed by the UAE. Shipowners are still waiting for clearer guidance on access, leaving one of the world’s most important energy arteries largely closed to traffic. Until it reopens, oil prices are unlikely to return to more stable levels, keeping inflation worries alive for investors. Getting the waterway flowing again will be a clear priority for the White House, which, despite some strongly worded social media posts, doesn’t seem to have the leverage needed to force a full reopening.
TSMC, the world’s largest contract chipmaker, reported first-quarter revenue up 35% year on year, beating market forecasts on continued strength in demand for AI hardware. March was particularly strong following a slightly softer February, with growth of 45%, almost double the longer-term average for the final month of the quarter. There may be plenty of noise elsewhere in the world, but the AI buildout shows little sign of slowing, with demand for AI hardware as strong as ever. Investors need only look at soaring GPU rental prices, tightening availability, comments from cloud CEOs, and now a strong set of sales from TSMC for confirmation. As software stocks continue to come under pressure, hardware names are beginning to absorb a greater share of investor capital. While certain software names look attractive at current valuations, we believe AI hardware is set to capture a larger-than-usual share of economic value in an increasingly AI-infused world, suggesting the chip trade may have further to run.
Gold is set for a third consecutive weekly gain, although it has not acted as the store of wealth or shock absorber that many might have expected during the recent Middle East tensions. That is largely because interest rate expectations have been the bigger driver of price action, outweighing the typical risk-off demand. This week’s tentative ceasefire, coupled with news of talks over the weekend, has shifted rate expectations into a more favourable position for gold, helping support the latest move higher.”
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