The FTSE 100 hit an all-time high yesterday – at last. It was up again this morning to hit an intraday high of 8,077.15. Yesterday’s record close saw the blue-chip index finish at 8,023.87, after rallying by more than 1.6 per cent.
The usual caveats apply: In dollar terms, it’s still a way off and the ‘record’ high in sterling terms doesn’t mask the longer-term structural weaknesses. But it does seem things may be improving for the UK – inflation is down, growth is picking up, real wages could keep rising for a year or two without leading to a wage-price-spiral, rates coming down and mortgage shock behind us, maybe there are reasons to be cheerful? Recent strength in the equity index may also have something to do with sterling weakness – GBPUSD touched $1.23 yesterday and found support but it is at a five-month low.
The yen is continuing to wobble at its 1990-lows near 155. There is a lot of speculation – indeed expectation – that the Bank of Japan will intervene. EURUSD trades firmer this morning with some decent PMI data showing encouraging signs. EURJPY hit its highest since 2008.
Gold is down hard for a second day – with the geopolitical risk premia starting to ebb. The 10-year Treasury Inflaton Protected Security is steady at around 2.2 per cent and the dollar is a bit weaker. The correlation between the dollar and yields has weakened considerably so we should look elsewhere for catalysts, it might just be payback after a monster rally combined with signs Israel and Iran don’t really want a war. Meanwhile, oil is a bit firmer with Brent bouncing off the 50-day line – again though bears seem in charge for the time being.
Wall Street rallied yesterday with the Nasdaq up more than 1 per cent in the wake of Friday’s drop, with Nvidia up 4.35 per cent to counter the 10 per cent drop in the prior session. Apple recovered 0.5 per cent but is still looking vulnerable at these levels. Tesla shares slumped to a 15-month low at $142, declining 3.4 per cent for the session despite the rest of the Magnificent Seven recovering. Its earnings are up tonight after a series of bad news reports – soft Q1 deliveries, cybertruck recall, price cuts and layoffs. There could be a catalyst for volatility – with it expected to report 40 per cent decline. It’s going to be hard to mask declining sales and margins – can Elon Musk deflect with the autonomous stuff? I don’t think so – investors want to know about the Model 2 mass-market vehicle, not the future. Consensus forecasts of $0.49 earnings per share suggest it will be the company’s least profitable quarter since Q2 2021.
The Trader is written by Neil Wilson, chief market analyst at Finalto
