Market report: FTSE 100 sets off on another sprint higher

• The FTSE 100 scales fresh heights in early trade.
• Middle East ceasefire talks eyed and Fed meeting in focus.
• Japanese Yen falls to multi-decade lows before recovering.
• Hipgnosis Songs Fund accepts Blackstone offer after bidding war.
• Vinted posts first annual profit amid second-hand zeitgeist.
• All eyes on Fed decision this week and Brent Crude dips below $89 a barrel.
• Elon Musk’s visit to China could help accelerate adoption of Tesla’s self-drive software.
• Amazon will be the latest big tech name to report numbers on Tuesday amid speculation about future AI winners.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘’Sentiment is upbeat at the start of the week, fuelled by relief that inflationary pressures in the US aren’t as bad as feared, and hopes return that a ceasefire could be negotiated in the Middle East. The FTSE 100 has scaled fresh heights, with another sprint higher in early trade. April has been a record-breaking month for the blue-chip index, with a glass-half full sentiment dominating. The Footsie has gained more than 11% over the last six months, with super-patient investors finally rewarded by this spurt of growth. The weaker pound against the dollar has been a key player in the power surge, with the greenback gaining ground against a basket of currencies on the latest interest rate expectations. Investor optimism has been buoyed by a rally on US markets on Friday, and developments in the Middle East. Negotiators from Israel and Hamas expected to meet in Egypt, while US Secretary of State Antony Blinken ups diplomatic efforts at the World Economic Forum in Riyadh, Saudia Arabia.

Private equity giant Blackstone appears to have emerged supreme in the bidding war for the Hipgnosis Songs Fund. It’s been a fast and furious few days as Blackstone’s bid trumped Concord Music’s revised offer which came in on Thursday. It’ll be fresh music to the ears for shareholders, who’ve seen their holdings jump in value as the bids sailed in. It’s a turn up for the books following a volatile run which saw shares sink to a low after the value of the fund’s music portfolio was slashed by more than 25%. With cybersecurity firm Dark Trace also agreeing to a takeover by private equity giants, there will be fresh hand-wringing in the city about the extent of the exodus from London. It’s no coincidence that Chancellor Jeremy Hunt is reportedly holding a summit in May to attempt to attract new firms to list, as a clamour intensifies for more action to be taken to make the London market more attractive.

The second-hand e-commerce platform Vinted has reported its first annual profit, a sign of the pre-loved fashion zeitgeist. Vinted hasn’t just become a money spinner for cash-strapped teenagers, it’s also browsed by fashion followers with much fatter wallets. Cost-of-living pressures have put more eyes on screen, with shoppers keen to sniff out a bargain but a desire to live and shop more sustainability is growing. This has been recognised by the fast fashion giant Primark, which now has pre-loved franchise in store. Chinese giants Shein and Temu may still be flooding the market with cheap goods, but fashionistas are increasingly brandishing their eco-credentials.

All eyes will be on the Fed meeting starting on Tuesday and comments from Governor Jerome Powell on Wednesday about how long we will need to wait for interest rate cuts to come. The US central bank is set to stay in its holding pattern and maintain high borrowing costs until September, but there’s still a chance that it may hang on even longer. There has been a palpable sigh of relief that the reading of inflationary pressures, taken from the Personal Consumption Expenditures Index on Friday, wasn’t as bad as feared, but there’s no avoiding the fact that the price spiral is staying sticky. The key jobs report out on Friday will be closely watched for any signs that unemployment will tick up more sharply in the months to come.  ‘Higher for longer’ is still set to stay the mantra of US central bankers, despite the gears of the world’s largest economy shifting down, although concerns that stagflation risks rearing its head is receding slightly.

Oil prices have fallen back slightly amid expectations of lower demand, given the strength of the dollar, and a glimmer of hope emerges again for a ceasefire in the Middle East. Stronger appetite for energy in China is also being questioned, given that industrial firms appear to be finding it hard to maintain their recent growth spurt.  Profits earned only rose 4.3% in the first three months of the year, compared to 10.2% in the previous quarter.

The yen dipped to the lowest levels since April 1990, before staging a recovery. The weakness came amid hopes for imminent rate tightening disappeared, while the dollar’s strength weighed heavily. However, the volatility in the currency comes amid speculation that the central bank is stepping in and buying the currency to try and shore up its position.  With consumer price inflation in Japan still below the 2% target, and the Bank of Japan’s historically cautious approach when it comes to changes in monetary policy, it should not have come as too much of a surprise that it opted for a holding pattern on rates on Friday. However, it was the forward guidance indications that most likely propelled the yen to precipitous lows.  With chief Ueda arguing that the yen’s recent weakness is unlikely to have that much effect on inflationary pressures, it was taken as an indication that there won’t be much tightening in the near future either.

Elon Musk’s visit to China has the potential to spur Tesla on a spurt of recovery, if a rollout of its Full Self-Driving Software is accelerated. This innovative software is the most autonomous of its Autopilot systems and there is considered to be high demand for it among Tesla’s Chinese consumers. If Musk is able to clinch a deal to enable the data acquired to be transferred overseas, it paves the way for a mega-roll out which should help pad profits and squeeze more revenues out of cars already sold.

Amazon will be the latest big tech name to report numbers on Tuesday. Investors will be waiting with bated breath to see if it will beat the double-digit growth in all areas, reported at the last earnings beat. With retail sales coming in stronger than expected thanks to the resilience of the American consumer, it bodes well for Amazon’s e-commerce sales. But there will be a razor-sharp focus trained on AWS, to establish how the frenzy for AI is showing up in sales.  AWS has dominated the cloud computing space, but rivals Microsoft, Google and Oracle are tough competition. AWS has invested heavily in generative AI products, but in this cycle of disruption, with highly differentiated software set to become arguably more important than infrastructure in the future, it could still risk falling behind the curve.’’