Emma Wall, Chief Investment Strategist, Hargreaves Lansdown: “While the war continues, markets and macro are pegged to the oil price. And so, with the value black gold down slightly, so equities in Asia and European and US futures are up. It follows a positive session yesterday, in which the FTSE 100 rose slightly to 10,403.60, up 0.83% and the S&P 500 up 0.25% to 6,716.09.
The oil price has softened – though brent still trades above $100 – thanks to two pieces of news; a select few tankers are moving through the key Strait of Hormuz and Iraq has agreed a pipeline deal to export oil via Turkey. A reminder that in normalised trade, 20% of daily oil and 25% of liquified gas flows through Hormuz; this activity is a fraction of that. But it does mark an improvement on last week, where the Strait was effectively shut. Iran is reportedly allowing only those tankers operated by countries considered neutral, or anti-US in this conflict, such as China.
While any relief rally is welcome, investors should be mindful that volatility is likely to continue over the next month, through extreme daily moves become less likely as markets look to longer-term indicators. Policy – both monetary and foreign – is key. Oil futures remain elevated compared to pre-conflict, with 6-month prices near $80. This is a key indicator of remaining risk to economic growth and consumer confidence.
Economic news is the order of the day across the Pond as the we get both an inflation print and the US Federal Reserve’s Federal Open Market Committee concludes its March meeting. They may be meeting stateside, but whatever the Fed says today will have global implications.
The US Producer Price Index inflation report for February will be released today, but will not reflect elevated oil prices, so is expected to show month on month increase of 0.3%, in line with longer term trends. Data for the month of March will be more revealing, including recent oil and gas shocks.
An hour after the inflation print we’ll hear from the Fed, who we expect to hold rates today, as does the broader market, so the news is unlikely to move prices. What does have the potential for upset is what Chair Jerome Powell says at his penultimate press conference – how the vote was split and any commentary on the war, forward guidance implications. The markets have flipped from expecting two cuts this year pre-Iran conflict, to one hike after the escalations, to now one cut is the consensus view, later in the year.
The Fed will also share its Outlook-at-Risk report, published monthly, which gives details of risks to unemployment, inflation and economic growth. Expect oil prices to dominate.”
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “Since Jensen’s keynote, we’ve had a couple of big confirmations – firstly, that NVIDIA’s eye-catching $1trn guide is based purely on Blackwell and Rubin GPUs, meaning it doesn’t include contributions from its other chips, rack-scale systems, or even the Rubin Ultra GPU slated for next year. Secondly, production of the China-focused H200 chip has now ramped after securing agreements from both US and Chinese authorities, alongside a new AI inference chip built through its partnership with Groq. Crucially, pretty much no one has China baked into forecasts right now, so this could be a material incremental driver, depending on how much NVIDIA is ultimately allowed to ship.”
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