Tech Selloff Amid Fed Cuts Revaluation, Trainline on Track

Equities

On Thursday, the FTSE 100 turned lower, closing 0.4% down. That was after the previous day, marked the highest point since late May, buoyed by data indicating early 2024 growth in the UK economy. The decline was partly due to a hotter-than-expected February US producer prices print, creating uncertainty around the timing for interest rate cuts in the developed world. The more domestically focussed FTSE 250 also fell by 0.4%.

OSB Group slumped 16% after announcing its 2024 profit margins would likely remain flat year-on-year, attributing this outlook to rising funding costs and a subdued mortgage market. In contrast, Vistry shares surged 8.2% after the housebuilder reported it would increase its home construction this year, buoyed by resilient demand and a 2023 profit that surpassed market expectations. Trainline Plc enjoyed a 13% jump in its shares after raising its full year adjusted EBITDA forecast. Deliveroo also saw a positive movement, with its shares up 2.4% following a report of better-than-expected core earnings and the anticipation of generating positive cash flow.

Across the Atlantic, US markets didn't fare well either. The Dow Jones Industrial Average fell by 0.35%, the S&P 500 by 0.29%, and the Nasdaq Composite by 0.3%. The decline in the US market was influenced by a drop in chipmaker stocks, including a 3.2% fall in Nvidia shares, amidst a broader semiconductor index (.SOX) downturn of 1.8%. This downturn reflects a broader market reaction to US producer prices rising more than expected in February, driven by higher costs for goods such as gasoline and food.

The S&P 500, despite the day's losses, remains up about 8% for the year to date, indicating a still positive outlook for the broader market. The Russell 2000, representing small-cap stocks, was notably down 2%, underperforming the broader market.

Forex & Commodities

The US dollar strengthened on Thursday, showing a 0.6% increase in the dollar index to 103.36. This rise came in the wake of unexpected hot US producer prices for February and a drop in unemployment claims, suggesting the Federal Reserve may cut rates less than previously anticipated this year. Meanwhile, sterling dipped 0.4% against the dollar to $1.2745.

Oil prices were poised to conclude the week nearly 4% higher, despite a minor dip on Friday. This was propelled by the International Energy Agency's raised forecast for 2024 oil demand and an unexpected decrease in US stockpiles. Brent crude and US West Texas Intermediate (WTI) both saw declines in the early trading hours of Friday, but the overall weekly gain was underpinned by revised demand expectations and refinery activity picking up.

In economic news, the Bank of Japan is reportedly preparing to exit its negative interest rate policy in its upcoming meeting, which has impacted currency movements. Additionally, the latest US retail sales data indicated a weaker than expected expansion, while the overall stronger dollar, coupled with anticipation around central banks' next moves, influenced market sentiments across currencies, gold, and oil.