Hold on — tech stocks are a safe haven now?

0:28Today's markets move fast. Good morning from the Financial Times. Today is Thursday, March 12th, and this is your FT News Briefing. Will releasing more oil calm the market? We're about to find out. And investors are turning to U.S. tech stocks for safety. Yes, you heard that right. Plus, we look at how the Iran war is threatening India's so-called Goldilocks economy. The Gulf really sits at the center of India's economic network, and that means if there's instability there, not just on energy supplies. It can really ripple through the economy. I'm Mark Filippino, and here's the news you need to start your day.

1:15The International Energy Agency will launch its biggest release of strategic oil reserves in history. It hopes to tamp down what it calls challenges in the oil market on a, quote, unprecedented scale. Oil prices have soared since the U.S. and Israel started attacking Iran nearly two weeks ago. The IEA will unleash 400 million barrels of oil. Now, to put that into context, that's more than double what it released after Russia's full-scale invasion of Ukraine in 2022. The IEA's move comes as the U.S. Development Finance Corporation announced it picked the insurer Chubb to help lead a coverage plan to reopen the Strait of Hormuz to global shipping.

1:53Chubb will serve as lead underwriter issuing policies to eligible vessels. This will allow the government to offer$20 billion in cover on a rolling basis, but that amount could rise.

2:09Investors had been fleeing from tech stocks lately. There was concern that they were forming a bubble and vulnerable to a crash. But now, kind of weirdly, investors are viewing American tech stocks as a safe haven asset because they're protected from the turmoil of the war in Iran. Here to talk more about this head-scratcher is the FT's Emily Herbert. Hey, Emily. Hey, Mark. So just how dramatic is this rush back into tech stocks? The numbers aren't massive, but what is quite striking is that the tech sector is the only sector in the S &P 500 that's actually gone up since the conflict began. So tech stocks within the S &P 500 are up about 1.5 % since the beginning of the conflict in the Middle East, whereas the rest of the S &P is down almost 3%, and every other sector is down.

2:56Emily, I got to tell you, I got a little chuckle when I read your story because we've talked to you and so many of your colleagues about investors selling off tech stocks this year because they were viewing them as increasingly risky. but now these equities are a safe haven asset? What's going on? Yeah, so a few investors did say to us this week that they're starting to think about some of these big US tech stocks kind of like safe havens now. I mean, I think there's a sense of at least we know that these companies have got their massive balance sheets, they've got these big profits, they've got loads of cash.

3:32And yes, there are lots of things about these tech stocks that the market was really worrying about before the conflict. There were big worries about how much money was being spent, about whether these AI companies were going to disrupt business models in the rest of the market. But I think there is probably a sense now of, yes, these are all still things to worry about, but I suppose they're more on a kind of five or 10 year horizon rather than maybe a five or 10 minute horizon. So, yes, some of these tech stocks are starting to look a little bit less risky than some other kind of big industrial or materials companies that are going to be really affected by high oil prices and high energy costs if the war continues.

4:11What about actual safe havens? You know, things like gold and sovereign bonds. How are they doing? Yeah, I think part of the reason that tech stocks have been so popular in this conflict is because the normal safe havens aren't really working. Because the main channel for investors here is the energy price and the oil price, this is seen as an inflationary shock. And inflationary shocks are really bad for government bonds, which would normally be a safe haven in any other shock. So government bond prices have really dropped and yields have gone much higher, which is causing a big problem for governments as their borrowing costs go up.

4:46Gold, which had also been a safe haven earlier in the year, has also dipped a bit. There's a sense there that investors are having to just sell what they had lots of in order to cover losses elsewhere, perhaps. And gold is definitely something that investors had a lot of going into this conflict. Emily, could this rush into tech come back to bite traders? There is definitely a sense that this could come back to bite traders, especially in the case that maybe the conflict wraps up in a shorter time frame, in more like days compared to weeks or months, because the things that people were worrying about before haven't gone away.

5:21And I think that if the conflict does come to an end sooner, then things like AI disruption and capex spending will come back into the foreground for investors. and some of those share prices that have maybe rallied a bit on the safe haven bid during the conflict could really get hurt again. Emily Herbert covers markets for the FT. Thanks so much, Emily. Thanks, Mark.

5:47U.S. inflation was unchanged in February and held steady at 2.4 percent compared to the same time last year. That's according to government data released yesterday. It's in line with what economists expected. Core inflation, which strips out volatile stuff like food and energy prices, was also flat. But this data was all recorded before the U.S. and Israel attacked Iran and made energy prices spike. So the report for March is expected to show a corresponding rise in inflation. And because of that, an economist told the FT the February inflation figure isn't going to move the needle on monetary policy.

6:23The Federal Reserve meets next week, and it's expected to hold interest rates steady.

6:34India has what its central bank governor describes as a Goldilocks economy. A combination of strong growth and low inflation, things are just right. But the war in Iran is threatening that perfect balance. Chris Kay, our bureau chief in Mumbai, joins me now to talk about why. Hey, Chris. Hello. So what would a prolonged conflict mean for India's economy? Yeah, so a long conflict would be very damaging for India. You know, India imports most of its oil and gas from the Gulf region. But not only that, it relies on shipping routes through the Gulf for trade. Millions of Indians work there and send billions of dollars home each year.

7:17So if it drags on, I mean, obviously it's already pushing up energy prices in India, but it could also have a wider effect on widening India's current account deficit, feeding into inflation, and that combination could really start to undermine some of the strong growth that India has been enjoying. How worried are India's policymakers about this threat we're talking about, and what are they doing to prepare? So India's government has generally been trying to play down the impact. So we had the finance minister earlier this week saying that the inflation impact is likely to be limited. but at the same time the government's trying to redirect supplies of natural gas, cooking gas as well to households and reducing stocks to industrial clients.

8:04What we're seeing really is though that markets and businesses are really already feeling this pressure. So a few things are happening at once. The rupee has fallen to record lows against the dollar and the Reserve Bank of India, the Bank has reportedly spent about, you know, 15 to 20 billion dollars so far since the conflict start of its reserves trying to defend the currency. Chris, over the past two weeks, I've talked to a lot of our colleagues about the disruption in the Strait of Hormuz as it relates to global oil supplies, but it's also crucial for other kinds of global trade. How damaging is the drop in shipping traffic there for India?

8:41Yeah, so India's deeply exposed. The Gulf cooperation council countries are India's biggest trading block, and they're a major source of investment as well. A lot of Indians work there, I think about 10 million or so, and they send maybe 50 billion in remittances each year. On top of that, India relies on the region for things like fertilizer. It's a massive logistics hub for it. A lot of its key airlines all go through it. So the Gulf really sits at the centre of India's economic network. And that means if there's instability there, not just on energy supplies. It can really ripple through the economy.

9:16Finally, diplomacy is a delicate matter here too. Will India at some point, you know, have to rethink its alliances with the countries at the heart of the war? Yeah, that's a big point. You know, India has relations with all the key players in this conflict. Prime Minister Modi wants to maintain close ties with Washington and Israel, especially after it secured that trade deal with the US, which took a while. At the same time, Iran used to be an important regional partner for India. So far, Delhi has really stayed largely quiet on this and has called for dialogue, but has avoided criticising the US or Israel.

9:54Opposition politicians are making hay of this. They're accusing Modi's government of drifting away from India's traditional non-aligned stance and moving closer to the US and Israel. and some former diplomats that we've spoken to have also argued that if India wants to be seen as a major global player, it can't stay silent when a major war threatens the region. The government, though, for now seems to be trying to keep a low profile and that seems to be the safest option, it believes. A delicate balance for sure. Chris Kay is the FT's Mumbai Bureau Chief. Thanks, Chris. Thank you.

10:32Before we go, a radio station is sending mystery messages to Iran.

10:42A voice says, which means attention in Farsi, three times, and then lists out a series of numbers.

10:52This is the first identified Farsi broadcasting in a quarter of a century, and it appears to be a so-called number station. That's what intel agencies use to send encrypted one-way orders to spies. The ghostly broadcasts are coming from a transmitter somewhere in Western Europe. They started just hours after the first U.S. and Israeli strikes on Iran. Former U.S. intel officers say the broadcasts are probably allowing Washington to maintain contact with agents in Iran amid the country's internet blackout. You can read more on all these stories for free when you click the links in our show notes.

11:26This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

11:55We'll be right back.

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