FirstFT: Stock markets undergo ‘risk reset’ as indices hit new records

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Growing optimism about the world economy and improved corporate earnings is driving stock markets to record highs, prompting analysts to forecast further gains in what some describe as a “risk reset”.

Wall Street’s S&P 500, the tech-dominated Nasdaq Composite, Japan’s Nikkei 225, Germany’s Dax and France’s CAC 40, among other indices, have all hit their highest-ever levels in recent weeks, amid hopes that central banks have succeeded in taming inflation without triggering a downturn.

Goldman Sachs and UBS have upgraded their year-end forecasts for the S&P 500 this year, and this month Bank of America raised its year-end prediction to 5,400 — about 5 per cent above the index’s current levels.

“It’s like a reset of the risk cycle,” said Evan Brown, a portfolio manager and head of multi-asset strategy at UBS Asset Management. “Everyone’s been anticipating a recession for a long time and it hasn’t materialised.” Read more about the drivers boosting markets.

Here’s what else I’m keeping tabs on today:

• Economic data: Economists expect the US core consumer price index increased 0.3 per cent in February. On an annual basis, the core figure is expected to tick down to 3.7 per cent from 3.9 per cent in January. Mexico’s national statistics agency publishes data on industrial output and Argentina is due to publish February consumer inflation data.

• Results: Archer-Daniels-Midland, the Chicago-based grain trader that is the subject of a Department of Justice probe into its accounting procedures, is expected to report fourth-quarter earnings after delaying their release in January. Retailer Kohl’s will also report earnings.

• Ghislaine Maxwell: An appeals court will hear oral arguments in Ghislaine Maxwell’s appeal of her December 2021 conviction and 20-year prison sentence for helping the disgraced late financier Jeffrey Epstein sexually abuse teenage girls.

• Congress: The leaders of the US’s spy agencies testify to the House of Representatives Intelligence Committee for a second day at a hearing assessing worldwide threats to national security.

• Joe Biden: The president hosts his Polish counterpart Andrzej Duda and Prime Minister Donald Tusk on the 25th anniversary of Poland joining Nato.

Five more top stories

1. Haiti’s Prime Minister Ariel Henry will resign once a transitional council has been created to run the Caribbean country. Henry’s resignation was first announced by Guyana’s President Irfaan Ali, chair of the Caribbean Community trade bloc, after an emergency meeting was held yesterday on the violence and lawlessness that has overtaken Haiti in recent weeks. Read more on the make-up of the transitional council.

2. Cross-border fire between Israel and Hizbollah has escalated sharply, as Israeli jets struck targets deep inside Lebanon and the militant group responded with some of the largest rocket barrages on northern Israel since the start of hostilities last October. According to the Israeli military, 100 rockets were fired by Hizbollah in two salvos aimed primarily at the Golan Heights earlier today. Here’s the latest on the escalating violence in Lebanon.

3. Joe Biden yesterday unveiled a $7.3tn budget plan for 2025 which would push US debt above 100 per cent of gross domestic product. The US president’s fiscal agenda boosts spending but plans to save $3tn through higher taxes over 10 years, and is designed to draw a sharp contrast with former president Donald Trump’s economic plans ahead of the presidential election in November.

4. Argentine President Javier Milei has fired his labour secretary for overseeing a 48 per cent presidential pay increase last month amid a government austerity drive — the first scandal to hit the libertarian economist’s administration. Analysts said the episode could prove damaging for Milei, who was elected in November on a dual pledge to solve Argentina’s worst economic crisis in two decades

5. The United Steelworkers union will later today ask President Joe Biden to open a trade investigation into alleged Chinese unfair economic practices in the shipbuilding and maritime logistics sectors. The USW and other unions will file a petition with the US Trade Representative outlining alleged discriminatory practices, according to people familiar with the move. The steel industry has become a 2024 election issue in the US since Nippon Steel’s planned takeover of US Steel was announced in December.

Join FT colleagues on March 21 at 12pm GMT for a subscriber webinar on the Israel-Hamas war, fears of a wider conflict and the chance of a long-term settlement. Register now and put your questions to the panel.

The Big Read

Since Telegram’s founding in 2013, the company’s Russia-born chief executive Pavel Durov has sought to cast the platform as a privacy-orientated alternative to Big Tech platforms unassailable from government interference. With 900mn monthly active users, it also attracts the lawless, disinformation pushers, conspiracy theorists and extremists. But as it continues to scale, monetise and prepare for a potential market debut, possibly in the US, Telegram will face increasing pressure to tame its dark underbelly.

We’re also reading . . . 

• Taiwan: The long-feared scenario of a Chinese invasion may yet unfold. But a more insidious threat is at hand, writes Alec Russell.

• Bitcoin: The recent price surge demonstrates a friendship of convenience between traditional finance and crypto, writes Jemima Kelly.

• Donald Trump’s legal woes: 40 Wall Street has a special place in the former president’s heart. “It’s one of my favourite deals” he told the Financial Times in 2008. Now it is being eyed for a possible sale to help pay Trump’s legal bills.

Chart of the day

Bag fees, which were introduced by airlines to counter surging fuel prices in 2008, have become a significant source of revenue for carriers. They generated $6.8bn of revenue in 2022, according to the Bureau of Transportation Statistics, more than double a decade earlier. The Department of Transportation is preparing to unveil new disclosure rules for airlines but the industry is united in opposition against them. Here’s why.

Take a break from the news

What’s behind Hong Kong’s obsession with pets? The booming industry has defied China’s economic slowdown, writes the FT’s Chan Ho-him, a proud owner of an adopted African pygmy hedgehog. But there is a grim side to this story.

Additional contributions from Irwin Cruz and Benjamin Wilhelm