Markets Rally on Hopes of Ukraine Peace Talks, but Inflation and Trade Tensions Loom Large:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went down around 0.59% on 13 February 2025.  

Macro Update:  Britain's economy showed unexpected resilience, growing by 0.1% in Q4 2024, contrary to forecasts of a 0.1% contraction, driven by 0.4% growth in December. This offers some relief to the government as it navigates broader economic challenges. Barclays reported a 24% rise in annual pre-tax profit to £8.1 billion, surpassing expectations, with strong investment banking performance and slower-than-expected interest rate cuts bolstering domestic lending. The UK government launched the 'Clean Industry Bonus', an incentive scheme to boost offshore wind investment, offering £27 million per gigawatt (GW) to successful bidders, aligning with its goal of decarbonizing the energy sector by 2030. Meanwhile, Shell released projections indicating strong growth in liquefied natural gas (LNG) demand, a steady increase in gas consumption, and oil demand peaking early next decade, reflecting long-term shifts in global energy markets. While these projections do not dictate Shell's corporate strategy, they highlight the evolving energy landscape and the need for adaptation. 

Top Market Movers: Among top gainers on FTSE 100 index, Coca-Cola HBC AG (LSE: CCH) witnessed a rise of 9.29% followed by Diageo PLC (LSE: DGE) which gained around 3.73%. 

Commodity Update: The U.S. dollar remained near a one-week high against the Japanese yen on Thursday, following a hotter-than-expected consumer price report. Meanwhile, the euro received support as news broke that Washington plans to initiate talks with Russia to end the ongoing war in Ukraine. U.S. President Donald Trump also hinted at imposing reciprocal tariffs on countries charging duties on U.S. imports, fueling concerns of an escalating global trade war that could further drive-up U.S. inflation. Commodities saw mixed results: gold rose 0.19% to $2934.20, while silver and copper slipped 0.16% and 0.23%, respectively. Brent oil dropped 0.73% to $74.63 amid expectations of easing sanctions if a peace deal is reached. 

Our Stance: Global markets responded positively to hopes of a potential peace deal between Russia and Ukraine, with European shares reaching record highs, driven by Nestlé’s strong earnings and broader market optimism. U.S. and European stock futures surged, despite concerns over rising Treasury yields and inflation, which could delay Federal Reserve rate cuts. Trade tensions resurfaced as President Trump threatened reciprocal tariffs on countries imposing duties on U.S. imports, adding uncertainty to global trade. Meanwhile, gold prices climbed amid economic caution. While the S&P 500 ended lower on inflation fears, CVS Health and Gilead Sciences saw gains after strong earnings reports. Eurozone bond yields stabilized after sharp increases, with investors watching Trump’s efforts to initiate negotiations between Putin and Zelensky to end the prolonged conflict. The market’s reaction reflects optimism about de-escalation in Ukraine but remains tempered by inflation concerns and trade risks. 

FTSE 100 

The FTSE 100 finished at 8,807.44 on Wednesday, gain by 0.34%, and formed a bullish candlestick pattern, signalling positive market sentiment. The index remains above its 21-period Simple Moving Average (SMA), suggesting a favourable short-term outlook. Furthermore, the 50-period SMA provides solid support, reinforcing the potential for continued upward momentum. With the Relative Strength Index (RSI) at 72.95, the index shows healthy bullish strength without reaching overbought levels, indicating there is still room for further gains. These technical indicators indicate a positive trend, suggesting that the FTSE 100 is poised for further growth. As such, the index remains an appealing option for short-term investors seeking potential opportunities. On the weekly chart, the FTSE 100 gained 0.31%, closing at 8,700.53. The index remains well above the 50-period SMA at 8,186.40, with support at 8,206.78. Resistance is at 8,850, and a breakout above this level could push the index toward 8,900. However, a drop below 8,020 could signal downside risk. Investors should monitor these levels for insight into future price movements. 

Data Source - Refinitiv