ECB Meeting Today & Tensions with Iran Lift Oil

Equities

The FTSE 100 saw an uplift, closing 0.3% higher after a day of volatility. This increase was buoyed by Tesco, which surged by 3.3%, reaching heights not seen in nearly a decade. The retailer’s optimistic profit forecast, citing early signs of improving consumer sentiment, played a significant role in this performance. Other consumer companies such as Reckitt Benckiser, Tate & Lyle, and Sainsbury's also enjoyed a lift in their share prices following Tesco’s announcement. British banks and insurers were not left behind, benefiting from rising UK government bond yields, with the market adjusting expectations towards interest rates remaining high for an extended period.

Across the pond, the US stock market faced a challenging day. The S&P 500 fell by 0.95%, while the Dow Jones Industrial Average and Nasdaq Composite dropped by 1.09% and 0.84%, respectively. This decline came on the heels of hotter-than-expected inflation data, dampening hopes for imminent Federal Reserve rate cuts. Among the sectors, real estate faced the brunt of the downturn, with significant declines in stock prices, marking a tough day for interest rate-sensitive stocks.

In contrast, Nvidia stood out by bucking the downward trend, with its stock price climbing by 2.0%. Similarly, Alibaba's US-listed shares rose by 2.2%, following a memo from co-founder Jack Ma expressing support for the company's restructuring efforts. This rare communication from Ma, who has remained out of the public eye for years, provided a positive impetus for Alibaba’s stock.

Back in the UK, the chip components maker IQE also made headlines, with its stock price leaping by 28.8%. The company’s optimistic forecast for fiscal 2024, backed by an improving order book, contributed to this significant rise.

Forex & Commodities

On Wednesday, the US dollar surged, hitting a new 34-year high against the Japanese yen following unexpectedly high US inflation data for March. This surge was fuelled by the consumer price index (CPI) rising by 0.4% on a monthly basis, exceeding economists' expectations. Year-on-year, the CPI increased by 3.5%, slightly above the forecasted 3.4%. Core inflation, which excludes volatile food and energy components, also saw a rise, prompting traders to adjust their expectations for a Federal Reserve rate cut from June to September.

This adjustment in rate cut expectations contributed to the dollar's strength, impacting other currencies as well. The euro, for instance, fell 1.06% to $1.0741. Against the yen, the dollar's value increased by 0.93% to 153.15 yen, reaching its highest level since June 1990. Market participants are also closely watching for any potential intervention from Japanese authorities to support the yen, especially given the yen's decline despite Japan's historic move away from negative interest rates.

Gold prices, meanwhile, retreated from record-high levels as the US dollar and Treasury yields strengthened in response to the inflation report. Spot gold fell by 0.7% to $2,335.99 per ounce.

In the oil markets, prices edged up as tensions in the Middle East, particularly involving Iran, the third-largest oil producer in OPEC, escalated. Brent crude futures saw a slight increase, reflecting concerns about potential supply disruptions amid the geopolitical developments.