“Signs of optimism” as markets rally amid hopes inflation has peaked, Ukraine crisis still a huge question mark

Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown, shares her views on the latest market news:

 “There are signs of optimism coming through on financial markets today with the FTSE 100 opening up 1.2% in early trade amid fresh signs a negotiated deal to end the conflict in Ukraine may be a step closer.

This comes hot on the heels of a rally in Asia and the US, where there are genuine hopes inflation may have peaked. 

All eyes are firmly focussed on the Federal Reserve meeting later today – the first in four years, where an interest rate hike is expected. Should this fail to materialise, further volatility across European and the UK market should be expected. It’s also worth keeping in mind the Russian invasion of Ukraine means the frequency and extent of rate rises may not be as high as previously predicted.

 Of course, oil prices are still very much front and centre of the financial – and consumer – worlds’ minds. Prices rose for the first time in three days on Wednesday, with brent crude reaching $102 a barrel. But exactly where they’re going to land long-term is very much determined by demand. With fresh, albeit tentative, hope of constructive talks between Ukraine and Russia swirling, there is scope for some further heat to come out the oil price. However, it’s more likely that continued volatility is coming down the pipes. This is despite the fact President Biden will be keen to keep a lid on gas prices in particular, as it’s an important political period in the US this year. Sourcing alternative oil looks to be a method that’s still a priority across the west, but unfortunately this is unlikely to mean the cost of filling our cars up is going back to normal in the immediate-term.

 It’s worth keeping in mind that the enormous sanctions placed on Russia run the risk of triggering a full-scale financial crisis in the country. There are expectations today that Russia may technically default on its debts as it seriously feels the pinch from the lack of access to its foreign exchange reserves.

Should a recession bite, Russia may well feel encouraged to keep exports at an elevated level to help itself. Oil is of course a huge part of that, although buyers have dwindled and those still willing to purchase are looking for bargains.”