Sentiment was lifted by the announcement that Israel and Lebanon had struck a ceasefire deal, as well as Iranian Foreign Minister Abbas Araghchi declaring that the Strait of Hormuz was “completely open”. In the US, gains were also fuelled by a rally in technology stocks, particularly semiconductors and software stocks.
The tech rally helped propel the Nasdaq Composite to a weekly gain of 6.8%, ending at a record high. The index logged a 13-session winning streak, its best run since 1992. Similarly, the S&P 500 also notched the same streak and hit new highs, adding 4.5%. The Dow Jones Industrial Average climbed 3.2%, finishing at its highest level since late February. Earnings season kicked off with results generally upbeat, although one weak spot was Netflix which saw its shares tumble on forecasting current quarter earnings would come in below expectations. Sector wise, energy was the weakest area, dragged down by a drop in oil prices, particularly on Friday due to de-escalation of the conflict in the Middle East. Treasury yields declined amid the decreasing tensions, with the 10-year note closing at 4.24%.
European markets also benefited from the signs of progress in the Middle East. The STOXX 600 was up 1.9% in its fourth weekly gain, although it has underperformed US peers over the conflict, owing to its high dependency on external oil and gas supplies. There were some unexpectedly positive data releases out, with eurozone industrial production rising 0.4% month-on-month (MoM) in February following a decline in January. Meanwhile the UK economy recorded a 0.5% MoM expansion in February. Nevertheless, the latest report from the International Monetary Fund (IMF) lowered its eurozone economic growth forecast for the year, while the UK saw the largest downward revision of G7 economies.
Positive sentiment carried across to Japan, with the Nikkei 225 rising 2.7%. On Thursday the index closed at a record high, although there was some profit taking in the following session. It was also buoyed by the renewed optimism in tech stocks as well as company earnings reports. In China the Shanghai Composite added 1.6% for the week and Hong Kong’s Hang Seng rose 1.0%. Economic data was mixed, with first quarter gross domestic product (GDP) expanding more than expected. However, March trade data revealed a sharp pullback in export growth in a sign of weakening demand in an uncertain environment.