Defence Stock Slip on Over Valuation Concerns, US CPI Data Due

Equities

On Tuesday, the FTSE 100 slightly dipped by 0.1%, affected by a downturn in defence stocks which outweighed the buoyancy in the mining and oil sectors, energised by robust commodity prices. Defence heavyweights such as BAE Systems, Melrose, and Rolls-Royce experienced declines ranging from 3.2% to 4.5%, following a critical assessment from Goldman Sachs regarding the sector's future valuation risks.

On a brighter note, BP saw its shares ascend by 1.3% after predicting an uptick in its first-quarter production of oil, gas, and low-carbon energy, marking a positive shift from its performance in the preceding months. The commodity-related gains were further highlighted as precious metal miners surged 2.8% to a peak not seen since July 2023, propelled by soaring gold prices. Additionally, industrial metal miners enjoyed a 1.4% rise, buoyed by optimistic demand forecasts for iron ore in China, with copper prices maintaining near 14-month highs.

In the United States, the Nasdaq Composite and the S&P 500 managed modest upticks of 0.32% and 0.14%, respectively, amid anticipation for the Consumer Price Index (CPI) data and the onset of the earnings reporting season by major banks. Financial stocks, however, lagged, with notable banks such as JPMorgan Chase, Wells Fargo, and Citigroup recording declines ahead of their earnings announcements.

In contrast, the biotech firm Moderna stood out with a 6.2% jump following promising results from an early-stage trial of its cancer vaccine, developed in partnership with Merck. Alphabet Inc also made headlines, climbing 1.1% as it edged closer to the $2 trillion market capitalisation milestone.

This was set against a backdrop of fluctuating sentiment in the cryptocurrency market, where firms like Coinbase Global and MicroStrategy saw declines of 5.5% and 4.8%, echoing the downward movement in bitcoin prices.

Forex & Commodities

The dollar held steady as markets awaited the US inflation report, with expectations set for insights into the Federal Reserve's rate decision strategy. Meanwhile, the Japanese yen again teetered near a crucial level that could prompt intervention from Japanese authorities. In currency movements, the New Zealand dollar experienced a brief spike to a three-week high following the Reserve Bank of New Zealand's decision to keep rates unchanged, albeit with warnings about persistent inflation.

In the commodities market, gold reached a record high, driven by buying momentum and geopolitical concerns, with eyes on the upcoming US CPI data for potential impacts on the Federal Reserve's timeline for interest rate adjustments. Gold's rise to $2,365.09 per ounce underscores its role as a hedge against inflation and geopolitical uncertainties.

Oil prices, on the other hand, faced a downturn for the second consecutive day amid ongoing ceasefire talks in Gaza. Despite the geopolitical tensions, the losses were contained, highlighting the market's sensitivity to supply disruptions and geopolitical instability. Brent crude futures and West Texas Intermediate (WTI) crude futures both saw declines as the market weighed the potential impact of the conflict on oil supplies and prices.