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.” He described the growing enthusiasm for stocks as a release of pent-up risk appetite. Read more about the drivers boosting markets.

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

• Economic data: Germany has February consumer price inflation data, the UK releases labour market statistics and Opec publishes its monthly oil market report.

• EU: The Economic and Financial Affairs Council of EU finance ministers convenes in Brussels for its monthly meeting.

• US: Joe Biden hosts Polish President Andrzej Duda and Prime Minister Donald Tusk on the 25th anniversary of Poland joining Nato.

• Results: Costain, Generali, Hill & Smith, Persimmon, Porsche and TP ICAP report full-year earnings.

Five more top stories

1. Exclusive: Brussels is pushing to give Ukraine €2bn-€3bn this year from profits derived from Russia’s frozen assets, accelerating the funding plan as US financial support to Kyiv wanes. A first tranche of money could be disbursed as early as July if Brussels can secure the approval of member states, officials said. Here’s what European capitals will be debating.

2. Britain has only about 700 detention spaces for migrants who arrive illegally, far fewer than needed to meet the ambitions of Rishi Sunak’s migration policy, according to an FT analysis. If the government started detaining migrants from April, at least 2,000 spaces in detention centres would be needed by the end of the month, with the figure rising to 5,400 by September, but new planned sites are years away from becoming operational. Read more about the capacity shortfall.

3. The head of Mercedes-Benz has called on Brussels to lower tariffs on Chinese electric cars imports, just as the European Commission is considering raising import duties amid a probe into Beijing’s subsidies for its car industry. Increased competition from China would help Europe’s carmakers produce better vehicles in the long run, the German group’s chief said, adding that protectionism was “going the wrong way”. Read the full interview with Ola Källenius.

4. Exclusive: A Bermudian financial structure used by the Miami-based bidder for Everton Football Club to funnel money invested for widows and orphans into the sport has begun to unravel. 777 Re, a Bermuda-based reinsurer, has enabled 777 Partners to pursue an ambitious dealmaking spree that has included trophy sporting assets and football clubs. But the reinsurer’s ability to further finance the Miami-based firm’s deals is under pressure, while creditors to 777 Partners have turned to the courts. Read the full story.

5. The UK government has backed the development of new gas-fired power plants in the latest move by Rishi Sunak to portray his government as taking a pragmatic approach to tackling climate change. Outlining the proposal today to back more electricity generation from fossil fuels, the prime minister said he would “not gamble with [Britain’s] energy security” despite plans to decarbonise the electricity grid by the middle of the next decade. Read more on the power market reform proposal.

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 . . . 

Chart of the day

The price of gold has surged 7 per cent in just over a week to hit record highs, leaving longtime market watchers struggling to explain one of the yellow metal’s most curious rallies. Some commentators have attributed the sudden price move to growing expectations of US interest rate cuts. But a number of analysts say none of the factors driving gold’s 16-month bull run are the likely catalyst for this recent rally.

Take a break from the news

For well over a century, successive avant-garde artists, from the Dadaists to Italian Futurists, have made it their mission to interweave art and life. Yet it’s the inexplicably neglected Sonia Delaunay who did it longest and best. An extensive show in New York explores the work of an artist who spent most of the 20th century producing furniture, playing cards, textiles, theatre costumes, fashion, paintings, mosaics — and her own persona.

Additional contributions from Benjamin Wilhelm and Gordon Smith