Market snapshot: fragile gains ahead of weekend peace talks

US markets held on to fragile gains with the spectre of a strained ceasefire looming in the background.

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Ahead of planned talks this weekend between the warring parties on a possible permanent solution, there clearly remains much to iron out. Most notably, Iran is maintaining its control of the Strait of Hormuz, with reports suggesting that the passage remains effectively closed, with only bulk carriers loaded with dry cargo, rather than oil, getting through. At the same time, the US military is maintaining its presence in the region, although more positively Israel has opened the door to negotiations with Lebanon, after Iran had called the ongoing attacks a violation of the ceasefire agreement.

Nonetheless, this was apparently enough for the bulls to nibble on, despite another tick higher in the oil price. The Nasdaq continued with its recovery, helped along by a gain of almost 3% for Meta Platforms Inc Class A (NASDAQ:META) as it revealed its new AI model. A broad but cautious markup of prices also enveloped defensive stocks, while there was a sharp spike in shares of Constellation Brands Inc Class A (NYSE:STZ), which sells Corona and Modelo beers in the US, as it reported better-than-expected quarterly numbers.

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Elsewhere, the Personal Consumption Expenditures (PCE) index showed a rise of 0.4% in February, in line with estimates. While the PCE is the Federal Reserve’s preferred measure of inflation, the historic nature of the reports leaves the findings all but meaningless on this occasion. 

Of rather more interest will be the release of the Consumer Price Index later today, since it will cover March and therefore some early signs of the effects of surging energy costs resulting from the conflict. Core inflation excludes the more volatile energy and food prices and is expected to rise from 2.5% to 2.7%, but more attention will be on the headline number which is expected to rise to 3.3% from 2.4%, displaying some initial knock-on effects.

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The cautious progress has improved the fortunes of the main indices and has tipped the Dow Jones into positive territory for the year so far, now guarding a cautious gain of 0.3%. Meanwhile, the more tech-focused S&P500 and Nasdaq remain in the red but on an improving trend, with losses of 0.3% and 1.8% respectively in the year to date.

Amid the sense of unsettled sentiment, Asian markets were mostly higher overnight, with China seeing the benefit of cooling consumer and producer prices in March. The Nikkei 225 also posted small gains after the Japanese Prime Minister announced that the country would be releasing an extra 20 days’ worth of oil reserves in May, in addition to the 15 days it has already procured from private sector petroleum stockpiles, thus providing some provisional insurance against tightening supplies.

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Despite the oil price ticking marginally higher, the oil majors slipped and, given their size, this weighed on the FTSE100 at the open. The index was largely flat, with the downward pressure offset by some selective buying among housebuilders, who have enjoyed a positive week following the likelihood of monetary tightening increasingly off the table. Retailers also found some friends after what has been a challenging few months, although gains were far from spectacular.

As the primary index edged ahead, taking its gain to 6.9% in the year so far, the more domestically focused FTSE250 reduced its losses for the year to just 0.8% after a more sprightly open. The FTSE100 continues to be something of a beacon of light in an unsettled world with its defensive qualities continuing to stand relatively firm.