Market Report: FTSE opens slightly higher, despite mixed jobs data
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “The FTSE 100 had a subdued start this morning, opening only slightly up as there was little news from big hitters to nudge it in either direction. Reports continue to trickle out into the media that the UK government is considering tweaking its support for first-time buyers by potentially reviving the Help to Buy scheme, or something similar. This comes as new home sales are struggling due to buyer affordability issues, and the government’s target of delivering 1.5 million new homes this parliament looks like a difficult hill to climb at this point. The key to any government support being effective for potential buyers will be to create a positive cost advantage over renting, likely through shared equity, which should help reduce monthly mortgage payments. Our preferred name in the UK Housebuilding sector remains Persimmon, thanks to its first-time buyer exposure, lower average selling prices, and in-house materials businesses.
After closing yesterday for a public holiday, US stock futures are trading lower today as AI-related fears continue to weigh on sentiment. Insurance brokers, wealth advisors, real estate services, and logistics were all in the firing line last week, and investors are cautiously watching for what slice of the market could be next on the AI hit list. With recent moves seeming rather disconnected from fundamentals, it’s simply not clear what part of the market the AI fears will come down on next. But for context, the US software and services sector is now trading at a discount to the broader sector for just the second time in 30 years. For investors willing to stomach some near-term volatility, this looks to be a great time to dive into the market and pick up some software bargains.
Gold prices have dropped more than 1% to around $4,920 per ounce this morning. That marks the second consecutive session of losses, partly due to weaker trading volumes resulting from public holidays in key markets such as the US, as well as in China and several other Asian countries for the Lunar New Year.
Brent Crude prices slipped slightly lower on Tuesday morning to around $68.2 per barrel, as the US and Iran are set to resume nuclear talks today. There’s speculation that Iran could agree to dilute its most highly enriched uranium in exchange for the full lifting of financial sanctions, but it’s not clear if that will be enough to seal a deal between the two parties.
Emma Wall, chief investment strategist, Hargreaves Lansdown: “UK jobs data may not have moved the equity market much this morning, but it has ramped up market expectations of rate cuts through 2026. Unemployment rose slightly to 5.2% for the three months to the end of December, according to the Office of National Statistics, and there are more people out of work looking for jobs. Redundancies are also up. The post-pandemic jobs boom is well and truly over, and wage inflation is slowing. We agree with the market that this weakness in data confirms expectations that the Bank of England Monetary Policy Committee will cut rates next month – remember that split vote last time around – but we don’t think it’s bad enough to tilt the Committee to abandon its slow and steady approach. Two cuts through the year is still our base case, given where inflation is and the current trajectory. That said, if jobs data continues to weaken, and is coupled with stagnant or non-existent economic growth, we could see a ramping up of cuts in the second half.”
Matt continued: “BHP delivered a strong first half, with profit up 28% and revenue 11% higher, supported by standout copper performance and record production across key assets. Copper has now overtaken iron ore as the biggest earnings driver, contributing 51% of cash profits (EBITDA), although iron ore remains a major cash generator with Western Australia Iron Ore again delivering record output and sector-leading costs. Strong cash generation and a resilient balance sheet underpin a business with two powerful profit engines – copper as the new growth leader and iron ore still a dependable cash cow.”