Market snapshot: glass still half-full among equity investors

Investors chose hope over expectation for an end to the Middle Eastern hostilities, propelling both the S&P500 and Nasdaq to record closing highs, thus totally wiping out any war-related losses.

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The tone of the rhetoric has calmed down over recent days, with the US President maintaining that the war is almost over and that the next round of talks may happen next weekend. In addition, Israel and Lebanon agreed a 10-day ceasefire, leaving the door ajar for a final resolution to the conflict.

For all the optimism among equity investors, bond markets are a little less sure. Risk sentiment remains on a knife-edge, with the US and Iran seemingly still far apart on some key issues. As such, inflation remains a concern and, whatever the outcome, the present oil supply disruption will take some time to unwind. This in turn could lead to a couple of quarters of disappointing GDP numbers in the US, which would take some wind out of the sails for equities.

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Even so, that appears to be a story for tomorrow. The early indications from the quarterly reporting season have been for the most part very positive, especially among the banks which have been boosted by exceptional trading revenues given the recent volatility. In some cases, this has led to a record quarter and, with consumer defaults still contained, the health of the US economy seems assured at least for the moment.

There will of course be exceptions in any given reporting season, and coming in against higher expectations, Netflix Inc (NASDAQ:NFLX) shares fell by almost 10% in after-hours trading. The drop comes after what has been a strong recovery among growth stocks and also despite the company reporting a 16% increase in revenues to $12.25 billion, driven by advertising, price increases and membership growth.

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For the moment however, the glass is half-full among equity investors. The main indices have all flown into positive territory in the year to date, with gains of 1.1% for the Dow Jones, 2.9% for the S&P500 which closed above 7,000 for the first time yesterday, and of 3.7% for the Nasdaq, which also passed a new milestone with the index closing above 24,000.

Throughout the conflict the progress of the FTSE100 has remained stable, if pedestrian, and the index has yet to regain the record high achieved in February. Even so, it has been something of a beacon of light among investors, especially in comparison to many of its global peers. Solid and dependable earnings, often underpinned by strong balance sheets, enable a higher total return including dividends, where the index currently yields 3% on average. A tepid open today nonetheless leaves the index 6.5% higher in the year to date, with the FTSE250 also nudging back into positive territory with 1.3% growth.

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Moves were mostly contained in early trades, with some weakness in Endeavour Mining (LSE:EDV) and Fresnillo (LSE:FRES) given a flat gold price, and with growing energy supply concerns beginning to weigh on the likes of SSE (LSE:SSE) and Centrica (LSE:CNA). Burberry Group (LSE:BRBY) popped slightly higher in a relief bounce following what has been a difficult week for luxury brands in general.