FTSE 100 at highest closing level in over a year

The FTSE 100 index has closed for the week at 7995 points, up 71 points or 0.9%.

That’s its highest closing high since February 2023, when the index hit its record high of 8,047 points (which we NEARLY hit again around lunchtime Friday).

Spirits were lifted by the news that the UK economy continued to grow in February, with GDP up 0.1%. Add this to the 0.3% increase in January, and we can be fairly sure that the UK has just exited the shortest recession in history.

We’ve given up trying to explain that a ‘technical recession’ is not technically a recession. So we might as well celebrate its end.

Another reason for recent positive moves in the FTSE 100 is down to heightened tensions in the Middle East with the risk of a regional war between Iran and Israel breaking out imminently, have propelled both oil and precious metal prices higher. Among the best performers in the FTSE 100 today are mining and energy stocks.

Fresnillo, the world’s second largest gold miner and largest silver producer, was the best performing FTSE 100 constituent closing up 7.61%, followed by major copper producer Antofagasta and Anglo American, the world’s largest platinum producer.

Energy is a major sector in the UK market, representing 12.8% of the FTSE 100, and both BP and Shell rose against a backdrop of Brent Crude oil prices exceeding $90 a barrel.

Unfortunately, stocks in the US continued to fall after the close in London Friday and FTSE 100 futures (open till 9pm Friday) fell with them. The June FTSE future closed at 7,956 so expect a lower open on Monday.

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In Europe

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The pan-European STOXX Europe 600 Index ended 0.26% lower. Major stock indexes also fell. Germany’s DAX lost 1.35%, France’s CAC 40 Index declined 0.63%, and Italy’s FTSE MIB slid 0.73%.

After trending lower early in the week, yields on French, German, and Italian government bonds jumped on news that US inflation had accelerated faster than expected in March. Yields subsequently pulled back from these highs as the European Central Bank held key rates steady but hinted strongly that it might lower them soon.

The ECB left its key deposit rate at a record high of 4.0%, as expected, but said that if an updated inflation assessment, which is due in June, “were to increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction.”

Asked if the strong U.S. inflation data would affect the policy path, she replied that the ECB was “data-dependent, not Fed-dependent” and that US and eurozone inflation were “not the same.”

Investor confidence in the eurozone rose in April to its highest level in more than two years, according to an index compiled by Sentix. The economic expectations barometer turned modestly positive for the first time since Russia invaded Ukraine.

In Germany, industrial production in February rose2.1% sequentially, the second consecutive month of strong gains, due to increased construction output. However, in the three months through February, production was 0.5% lower than in the previous period.

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In the US

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The major US equity benchmarks retreated for the week amid heightened fears of conflict in the Middle East and some signs of persistent inflation pressures that pushed long-term Treasury yields higher. Large-caps held up better than small-caps, with the Russell 2000 Index suffering its biggest daily decline in almost two months on Wednesday and falling back into negative territory for the year to date.

Growth stocks also fared better than value shares, which were weighed down by interest rate-sensitive sectors, such as real estate investment trusts (REITs), regional banks, housing, and utilities.

The primary factor weighing on sentiment was Wednesday morning’s release of the Labour Department’s consumer price index (CPI) data, which showed headline prices rising by 0.36% in March, right in line with February’s increase, in contrast with consensus hopes for a small decline from the month-earlier pace.

A rebound in the price of medical services (from -0.1% in February to +0.6% in March) was partly to blame, as was a continuing sharp rise in transportation services costs, which rose 10.7% over the preceding 12months, fed largely by increases in the cost of car insurance. Overall inflation rose 3.5% over the preceding 12 months, its biggest gain since September.

More concerning may have been a material increase inso-called supercore inflation, which tracks services prices excluding energy and housing costs, which policymakers have acknowledged are a lagging indicator of overall inflation trends. Supercore inflation jumped 0.7% in March and 4.8% over the past 12 months, substantially higher than expectations and its biggest increase in 10 months.

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In Asia

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Japan’s stock markets gained over the week, with the Nikkei 225 Index up 1.4% and the broader TOPIX rising 2.1%. As the Japanese yen hovered close to a 34-year low, investors’ focus was on whether the country’s authorities would step in to support the currency.

Following the hot US inflation print and subsequent rise in Treasury yields, the 10-year Japanese government bond yield rose to 0.84%, from 0.77% at the end of the previous week. It briefly touched its highest level since November 2023 during the week.

Chinese stocks retreated as weak inflation data underscored the lacklustre demand hanging over China’s economy. The Shanghai Composite Index declined 1.62%, while the blue-chip CSI 300 gave up 2.58%. In Hong Kong, the benchmark Hang Seng Index ended nearly flat from last week after apprehensions about the flagging recovery pared earlier gains.

China’s consumer price index rose a below-consensus 0.1% in March from a year earlier, down from February’s 0.7% rise, as food costs retreated following a brief increase during the Lunar New Year holiday inFebruary. Core inflation rose by 0.6% but was weaker than February’s 1.2% increase. Meanwhile, the producer price index fell 2.8% from a year ago, marking its 18th month of declines and accelerating from February’s 2.7% drop.

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What to look for next week

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Investors' focus over the coming week is shifting away from the US a little, even as the first quarter corporate earnings season are now under way.

Of key importance would be the February UK employment report, on Tuesday, followed by consumer and producer price figures on Wednesday.

A barrage of activity indicator for the month of March are also due out in the People's Republic of China, come Wednesday.

In the States, the market spotlight would likely be on the March retail sales report, on Monday, and the Philly Fed factory index on Thursday.

Most of the main corporate action takes place in theUS with banks and Netflix among the standouts as quarterly earnings season starts again.

Here in the UK, bookie Entain, a trio of recruiters, wealth manager AJ Bell and pest control specialist Rentokil are ones to watch for as on-diary company news flow picks up.

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Also worth noting is that finance ministers from around the world will be meeting to discuss global developments at the International Monetary Fund's Spring meetings on 15-20 April.

Geopolitics wouldn't be far from investors' minds either, given Tehran's strike against Israel.

Enjoy the rest of your weekend and we hope that next week will be as profitable for your TPP portfolio as the last one was.

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