A strong finish on Wall Street on Thursday and an advance in Asian stocks on Friday set the tone for steady trading in Europe as attention turns to Pakistan-brokered peace talks between the US and Iran.
The ceasefire agreement announced earlier this week has felt fragile at times, although news that Israeli prime minister Benjamin Netanyahu has approved direct talks with Lebanon could address one of the key sticking points between the parties.
With talks between Tehran and Washington set to get underway on Saturday, investors could be in for a fretful weekend as they wait for indications of whether a path to lasting peace is possible. Ahead of this, investors may well be tempted to hedge their bets.
Later today a reading of US inflation for March may show the initial impact of the war on prices. The headline figure is likely to have been pushed up by higher fuel prices at the pump – one of the very first things to be impacted by the conflict.
For this reason, there may be greater focus on the core number – which strips out food and energy – to see if inflationary pressures are seeping into other parts of the economy.
In the UK, there was a modest recovery in retailers and housebuilders. Energy stocks were lower despite oil prices remaining steady above $97 per barrel.
The AI-driven story at TSMC continues to rumble on despite the volatile geopolitical backdrop. A 35% increase in first-quarter revenue, better than analysts were forecasting, suggests the investment push in artificial intelligence remains intact for now.
The full quarterly report and an updated outlook is out on 16 April and will be a first opportunity to gauge whether events in the Middle East and the resulting energy shock might disrupt AI growth for the Taiwanese chip manufacturer.
AO
Four years since retreating from Germany with its tail between its legs, electricals retailer AO is firmly back in growth mode thanks to robust UK trading. Importantly, profits are growing ahead of sales which implies it is running a tight ship and coping with material cost pressures.
Selling washing machines and fridges online is a low margin game, yet AO has found a way to make money thanks to having fingers in many pies, including recycling and renting out electrical goods. Customers seem happy, judging by online review scores, and management is upbeat.
With the UK operations seemingly in a good place, it wouldn’t be a surprise to see AO weigh up bolder ways to accelerate its growth over the next year or so.
For now, there are potential headwinds on the horizon that could challenge AO as the year progresses. A spike in energy and shipping costs raises questions around whether product prices will have to go up and whether consumers will be able or willing to pay more, particularly for non-essential items.
The cost of living is clearly going up, given the knock-on effects of what’s happening in the Middle East, and consumers might need to think carefully about where they splash their cash. A broken fridge or washing machine would be a no-brainer to replace, but upgrading a TV, phone or laptop might be an obvious thing to delay for a while.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
