Derren Nathan, head of equity research, Hargreaves Lansdown: “The FTSE 100 opened down around 0.6% this morning as Iranian naval drones attacked oil tankers in Iraqi waters, sending oil prices back to the $100 mark. Volatility will likely persist in the near-term, but a co-ordinated international response by the 32 members of the International Energy Agency, who have agreed to the largest ever release of emergency oil reserves, should provide some offset as 400 million additional barrels find their way to the market. It’s a testing time for investors, but those with long memories may take comfort in the fact that stock markets have shown remarkable resilience over the years. Since the turn of the century, the FTSE All World index has more than trebled while navigating events including the dot com crash, the Great Financial Crisis, Russia’s invasion of Ukraine, the coronavirus and Liberation Day.
This morning’s RICS UK Residential Market Survey showed that the headline net balance for new buyer enquiries slipped from -15% to -26% in February as prospective homeowners exercised caution due to heightened geopolitical and macroeconomic uncertainty, and a difficult mortgage market. Price rise expectations have also moderated but remain positive on a 12-month view. The depth and length of hostilities in the Middle East are likely to remain a key influence on buyer sentiment. Valuations amongst the UK housebuilders look attractive, but the current environment means investors may need to show patience. Some players are better placed than others to navigate the challenging outlook with Persimmon’s substantial land bank, relatively low price point and balance sheet strength making it a worthy of contender for those seeking exposure to the sector.
US stock futures have fallen this morning after a mixed performance by the major indices on Wednesday. The tech-heavy NASDAQ managed to keep its head above water as Oracle’s results provided further evidence of surging demand for computing power, sending the stock up 9% with US-listed semiconductor names broadly in the green. Shares in Uber were up as the ride-hailing pioneer announced a strategic partnership with Amazon-backed robotaxi developer Zoox. Passengers could be taking a trip down the Las Vegas strip as soon as this summer. Uber’s doing the right thing by attempting to future-proof its business, but there are some big questions around the ability of Zoox to scale. The same can’t be said of Tesla however, and it’s Elon Musk’s route to market that’s likely to drive the future of autonomous taxis.
The US Consumer Price Index read out for February was thankfully uneventful, with price rises unchanged at 2.4%, bang in line with economists’ forecasts. In quieter times, that would be taken as a positive, but these figures haven’t captured the recent spike in energy prices. While the numbers do point to a picture of underlying price stability, interest rate expectations are likely to be dominated by geopolitical events for a while yet. While the likely timing of further reductions in borrowing costs has been pushed out a few months markets are still expecting at least one rate cut by the Fed this year.”
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