The technology turbulence in particular has been a catalyst as the comes back into global investment fashion. Although the index has flirted with record highs and passed the number intraday over recent trading sessions, it has been unable to maintain the momentum later in the day and has yet to eclipse the record closing high set at the end of February. Even so, the attraction of the solidity and stability typical of most of its constituents has lifted the index to a gain of 9.4% in the year so far, although any gains at the open were limited by a lurch downwards from a core heavyweight.
There was a sense of palpable alert in the pharmaceutical sector after weekend reports that US giant Bristol-Myers Squibb and the FTSE 100’s second largest constituent, AstraZeneca were considering a major merger which could reach some $400 billion. The talks were not confirmed by either party, and it is questionable whether such a merger would be to the benefit of either party given some value destruction in such moves historically, even if there would be some obvious symmetry given their complementary expertise in oncology and cardiovascular. The opening reaction was a fall of around 7% in Astra shares, sending a clear signal that investors would potentially be strongly opposed to such a deal.
US markets ended a rollercoaster month on a high, as investors looked through rising bond yields and persistent AI spending concerns.
The positive momentum looks likely to continue today, after the US President announced over the weekend that a planned major attack on Iran had been cancelled as a diplomatic solution to the conflict is sought. fell by more than 5% to around $83 per barrel, which compares to approximately $72 pre-conflict, although investors may be circumspect since this playbook has been seen on many occasions over recent months.
In the meantime, the AI theme continued to play out as has become the theme for this earnings season, whereby companies are increasingly being punished if the continued and committed levels of AI spending are not obviously translating into physical earnings. On the other hand, if there are signs of progress the rewards can be meaningful, as evidenced by Microsoft (NASDAQ:) last week which was followed by a 15% spike in the Amazon (NASDAQ:) share price on Friday. The company beat expectations for revenue in the second quarter, boosted by the strength of its cloud-computing business which provided some comfort that AI spending can be at least partially rewarded. In contrast, Apple shares dropped by more than 7% despite topping estimates, with a weaker revenue outlook which the company blamed on a supply crunch in the components space in the midst of high AI demand.
The initial reaction to the new Federal Reserve Chair’s tenure has not been positive. He has moved away from the forward guidance to which the market had become accustomed, while also admitting last week that there was no “magic wand” to hand in the battle against persistently high inflation. This translated into a loss of faith from investors which was most acutely reflected in the bond market, where the yield on the and has risen to either side of 5%, which is becoming uncomfortable for the wider economy and borrowing levels in general.
Indeed, there will be further clues this week from both corporates and economic readings. On the company front, there will be updates which will shed light on the consumer (Walt Disney, McDonald’s), industry (Caterpillar) and inevitably tech (Advanced Micro Devices (NASDAQ:)), with other highlights being Pfizer numbers and the first post-IPO report from SpaceX (NASDAQ:). At the end of the week, the release is pencilled in at 87500 jobs having been added in July, up from 57000 the previous month, with unemployment ticking marginally higher to 4.3% from 4.2% previously.
In the meantime, the main indices have ploughed on regardless of the volley of worries which they have faced and in the year to date there have been gains of 9.2% for both the and , with the benchmark having added 9.4% and each of the indices close to recent record highs.