Shares in London have picked up where they left off yesterday, the FTSE 100 rising nearly 0.5 per cent in early trading, as miners stage a comeback and positive updates from Next and GSK really help lift the mood.
Glencore is leading the blue-chip leaderboard this morning on the back of an updated production report, plus some stabilisation in the gold price, which has been hurting miners in the past week. Shares in rivals have joined in the party, with Fresnillo, Endeavour, Anglo American, Rio Tinto and Antofagasta all making the top-10 risers. Of course, there’s also another positive surprise from Next, which has seen its shares rise more than 5 per cent. At this stage, you just question its forecasting. More on all that here.
Yesterday, things turned positive as the day wore on, and after a slow start, shares in London finished the day up 0.44 per cent to close at another high. This came alongside a strong start in New York, which also finished its session in the green, although things there are slightly more concerning.
The S&P ended the day up 0.2 per cent, with the tech-heavy Nasdaq rising 0.8 per cent. Shares in the Magnificent Seven stocks were up 1.3 per cent; all are at record highs. But Jim Reid from Deutsche Bank points out some worrying signs. If you equal-weight the S&P 500, it fell 0.9 per cent yesterday, and only 104 of the 500 companies included in the index ended yesterday in the green, which Reid says is the fewest number of risers on an ‘up’ day since his records began, back in 1990. So it’s all positive on the face of it, but there’s only a handful of stocks doing the work.
It’s the usual names, of course, Nvidia rose 5 per cent and Microsoft 2 per cent. The former after it announced partnerships with Uber, Palantir and CrowdStrike, and a $1bn investment in Nokia to connect its quantum computers to Nvidia’s chips. What’s that? More circular deals?
There’s more. Microsoft upped its stake in OpenAI to 27 per cent after OpenAI committed to purchasing $250bn in cloud computing services from Microsoft’s Azure. Buying your customers and your suppliers and spreading the money around. We’ve discussed these kinds of deals a lot both in this newsletter and on the Investors’ Chronicle website, but they seem to be getting worse.
You can understand the premise: these companies have tonnes of cash to invest in AI, Nvidia is soaking up most of it, and then recirculating it back to the industry to buy even more chips. If this technology ends up providing the productivity gains all these businesses think it will, then great, but as soon as one decides it doesn’t, it could all come crashing down. That’s the bubble we should be worried about, not share prices. You can read more about that here.
That brings us to what’s probably the biggest event of the day, but one that’s fully priced in. The Federal Reserve is expected to cut rates by 25 basis points later on this evening. Traders are operating a little blind, as there haven’t been many official data points released lately due to the government shutdown, but the Fed’s decision is assured either way. We’ll also have Q3 reports from Microsoft, Alphabet and Meta coming after markets close.
By Taha Lokhandwala