Bright start for FTSE as central bankers seek lower prices from biggest firms: market update from HL’s Sophie Lund-Yates

by | Apr 2, 2024

As the morning markets get going after the Easter break, Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown, shares her review of the main talking points so far today commenting:

“The FTSE 100 has opened higher as trading kicks off again after the break, following some encouraging inflation data which showed UK shop price inflation has dropped to a three-year low. It was a mixed but fairly uneventful night on Wall Street, meaning there was nothing contentious enough to upset the apple cart on this side of the pond. Investors will now be looking forward to key jobs data from the US which will give a more detailed idea of the Federal Reserve’s next move.

Central bankers including Jerome Powell and Christine Lagarde are urging the world’s biggest tech and consumer names to limit price increases – by limiting the amount of higher wage costs that get passed down to customers. It’s estimated that almost half of the eurozone’s inflation spike has come from corporate profit since early 2022. The fatter wages paid by the biggest names have contributed to a justification of higher price points, but policymakers would like some reassurance that they will play their part in the war against inflation. Higher interest rates are only one tool in the armoury that can be used to calm the inflation situation, and before cuts can happen, it seems the powers that be would like some assurances from big corporates that they will help the cause. The scope and timing of any such pricing policies are very much unknown, and aren’t guaranteed. But, there is a risk that should this plea be listened to, the bigger names could see profitability suffer in the short term. This would come at a time when inflating margins is already a more difficult task than it has been, and would be an unwelcome development from investors in the sector, especially for companies that already face a volume problem. 

Donald Trump’s media company has seen a bleak start to the week, with little respite expected for now. The group saw its shares drop 21% on Monday, eradicating gains from its debut. Not only have hefty losses been announced, but there is significant uncertainty surrounding broader financial strength, with its ability to meet liabilities apparently a struggle. Trump himself can’t sell his shares for months, and is one of the biggest losers following what was arguably a colossal over-valuing of Truth Social.

AstraZeneca’s strong approvals momentum has continued with the approval of Voydeya as an add-on therapy for the treatment of a rare condition affecting red blood cells. Astra’s position within rare-disease treatments is an area that helps set it apart. Of course, no pharmaceutical giant is anything without a strong pipeline, given the way exclusivity expires on existing drugs. So while Voydeya’s revenue potential remains to be seen, it does show that AstraZeneca has a leading role in bringing new therapies to market.  An Israeli airstrike on Iran’s embassy in Syria, which has killed Iran’s top commander, has reignited geopolitical tensions, and squeezed the oil price higher in return. Brent crude is now trading at over $88 a barrel, as concerns over supply spill over into the price. At the same time, there’s little expectation that OPEC’s production policies will loosen, adding further pressure.”

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