War de-escalation to spur FTSE Relief Rally

Equities

On Friday, the FTSE 100 showed resilience, gaining 0.2% towards the end of the trading session despite ongoing geopolitical tensions in the Middle East. The increase came after dovish remarks from Bank of England Deputy Governor Dave Ramsden indicated that inflation might stabilise around the 2% target over the next three years. The midcap FTSE 250 wasn't as fortunate, experiencing a decline of 0.3%.

Mondi, the paper and packaging group, stood out with a surge of 9.3%. This was in response to news that it had not made an offer to acquire DS Smith, despite rumours to the contrary after DS Smith confirmed a deal with International Paper.

In the same vein, DS Smith's shares fell sharply by 10.3%, making it one of the worst performers in the index on Friday. The performance of other sectors was mixed, with utilities leading the gains by 1.0%, while construction stocks faced the steepest losses, dropping by 1.4%.

Turning to the United States, the stock market presented a mixed picture with the tech-heavy Nasdaq recording its most significant weekly decline since October 2022. The S&P 500 also slipped, reflecting concerns about inflation and potential Federal Reserve rate cuts. Notably, the megacaps, often referred to as the Magnificent Seven, are poised for their earnings releases next week, which could significantly impact market directions. Tesla's shares have dropped about 40% in 2024, reflecting investor concerns about its electric vehicle business. Meanwhile, Meta Platforms has seen its shares jump over 40%, and Alphabet and Microsoft have recorded year-to-date gains of approximately 12% and 7.5%, respectively.

Forex & Commodities

In currency markets, the US dollar witnessed a minor decline against the Swiss franc, touching a two-week low overnight, while also dipping against the yen. The British pound dropped 0.5% against the dollar, reflecting broader market uncertainties and the impact of economic data.

The Swiss franc and the Japanese yen, typically safe havens, saw an uptick but remained off their highs, following a de-escalation in Middle East tensions. This slight rise came after Iran signalled no intent to retaliate against an Israeli strike, which calmed fears and reduced the demand for these safer assets.

Gold, often seen as a safe investment during volatile times, also retreated from recent highs. Spot gold fell by 0.9% to $2,369.97 per ounce as fears of a wider conflict in the Middle East eased, reducing its appeal as a safe haven. The downward movement in gold prices came despite ongoing concerns about inflation and the potential for future interest rate hikes.

Oil prices reflected similar trends with a decrease as geopolitical tensions seemed to cool off. Brent futures fell to $86.62 a barrel, a significant shift from earlier spikes that occurred in response to the Israeli action in Iran.