Market Report: UK public borrowing signals tax hikes to come, US momentum continues
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “The FTSE 100 dipped at the open from yesterday’s record close, but looks to be using 9000 as a floor in early trading. Investors are weighing up fresh company results alongside the latest public borrowing figures. Despite an overshoot in June, borrowing is clinging to the OBR’s forecasts, but storm clouds are gathering as weaker tax receipts and soaring debt interest payments signal tougher times ahead. With economic growth faltering and spending cuts unravelling, the chancellor faces a £15-25bn Budget shortfall, likely forcing higher taxes to preserve fiscal discipline.
A stealthy bullish wave is gripping US markets, as earnings season continues to throw up positive surprises. Early gains petered off as yesterday’s session ran its course, but the S&P 500 and Nasdaq managed to cling on to modest gains of 0.14% and 0.50%, despite tariff clouds looming over the 1 August deadline. With a resilient economy providing a stable base for equity prices, investors sitting on the sidelines will be itching for opportunities to jump back in.
NVIDIA’s faced a couple of small hiccups in the past few days, but nothing that’s likely to materially impact the revenue outlook. First, there were rumours that the revamp of sales to China might take longer to ramp than the bulls might have hoped, and today, news that the $500 billion Stargate project is rescheduling the pace of its investment. Building out AI infrastructure is no easy feat, so an adjustment on the SoftBank-OpenAI-led project to now focus on a smaller data centre by the end of the year isn’t a major surprise. The $500bn programme remains in place, and no individual project will materially impact NVIDIA’s outlook.
Gold continues to push ever closer to a five-week high as tariff uncertainty looms overhead. But there’s clearly more to the story. Money flowing into gold, crypto assets, and equities at the same time is perhaps a broader signal that investors are concerned about ballooning US debt and the weakening dollar.
Oil futures slid in early trading, a third straight session of declines, as jittery markets grapple with trade uncertainties clouding global demand prospects. With EU-US trade talks teetering on the edge of President Trump’s 1 August tariff deadline, investors are bracing for potential fallout, while OPEC+ supply increases and Iran’s nuclear deal revival efforts add fresh layers of complexity to an already volatile landscape.”
The author holds shares in NVIDIA
Derren Nathan, head of equity research, Hargreaves Lansdown: “Contract caterer Compass Group has extended its record of reliable delivery by serving up an upgrade to guidance with its third quarter trading update. Organic revenue rose by 8.6% led by a 9.6% increase in the all-important North American division, with increased volumes supported by both retention rates and new business growth. For the full year, organic growth is expected at over 8% with underlying operating profit to expand faster at close to 11%. The group’s also leaping on the opportunity to consolidate this fragmented market, announcing another €1.5bn acquisition today for Vermaat Group, which operates at the premium end of the market and comes with an impressive growth and margin profile.”