Market Report: US policy spells trouble for tech, but FTSE bucks the trend
Steve Clayton, head of equity funds, Hargreaves Lansdown: “Wall Street turned lower last night, led by tech stocks. With both semiconductor and software sectors drifting around 1% lower, the weakness was spread across the technology spectrum. Old economy sectors fared better, with transportation, energy and mining stocks all making positive headway last night. Market research specialist Gartner was the biggest loser of all, with the stock cratering by over 27%, after the latest results update left investors worrying that the group’s research services could be at risk from AI substitution.
Chip maker AMD dropped in after-hours trading, following its quarterly earnings release. CEO Lisa Su expressed caution over future sales of the company’s MI308 AI processor. The MI308 was designed for the Chinese market, the biggest individual sales opportunity for chip makers. Having banned US companies from selling AI capabilities to China earlier this year, the Trump administration had proposed reversing this. Ms Su revealed that AMDs licences to export MI308 chips were still under review by the US Government and until approved, no revenues can be generated from Chinese destined sales.
The latest US ISM Services survey release shows the impact of tariffs on American commerce. The overall index fell to 50.1, a level indicating a very modest level of expansion of activity for the services industries. Looking at the components of the index, a few things stand out. Employment saw its index drop to 46.4, indicating a meaningful reduction in staffing levels, while the Prices Paid index rose to the highest level in almost three years. Steve Miller, the chair of the ISM Survey committee highlighted the impact of tariffs The data suggest that US services companies are now facing rising input costs that they will need to pass through in coming months. No wonder the Federal Reserve appears in no hurry to serve up the interest rate cuts that President Trump is eager to see.
When Trump first launched his wave of tariffs upon trading partners it was about levelling the playing field, as he saw it. We’ve moved on. Tariffs are now a foreign policy tool, and the President was last night threatening Russia’s trading partners with substantial new tariffs, unless they cease supporting Russia through buying Russian exports, mainly of hydrocarbons. India looks set for a particular squeeze, given potential additional tariffs on the pharmaceutical industry worldwide would hit India’s important drug manufacturing sector especially hard, on top of the extra punitive tariffs the nation faces as a result of buying Russian oil.
The FTSE 100 bucked the weak trends on Wall Street, to open around 20 points or 0.22% higher, led by Hiscox, the specialist insurer which jumped 15% after well received results out this morning. Sterling is holding steady at around $1.330 and €1.149. In the energy markets Brent futures are up around 50 cents to $68.15.”