FTSE holds steady, UK retail sales surge and HSBC sells Argentinian business
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “The FTSE 100 has held broadly steady, as equity markets enter a holding-pattern scenario ahead of tomorrow’s US inflation data. With relatively limited corporate news to change the tide, investors are more concerned with macro events this week. Expectations for how much the Federal Reserve will cut rates this year have fallen to their lowest level since October, following unprecedented labour market figures last week. Interest rate-sensitive treasury yields have edged higher as a result, and the overall mood across US and European markets is very much a cautious wait-and-see approach today.
UK retail sales rose 3.2% in March, compared to the same time last year. That was significantly better than expected. The improvement was driven by early Easter shopping, which helped lift food sales. This bodes well for Tesco’s results on Wednesday, whose market-leading position holds it in good stead to capture broader optimism. The other element to these figures is a suggestion that cost-of-living pressures are well and truly easing for consumers on above-average incomes, which would have huge ramifications for the entire retail sector. If this is the case, then coupled with the warmer weather hopefully around the corner, the result could be a fairly potent dose of economic activity.
HSBC is making tracks to hone its focus on Asia, and has announced plans to sell its Argentinian business. The move will result in a $1bn pre-tax loss in the first quarter, but the short-term financial hit will be offset by relief that the group is coming good on its plans to streamline. HSBC is increasingly allocating capital to India and China, as it works to complete its Asia pivot. This is something that carries some risks in the short-to-medium term, but should be viewed through the lens of a growth opportunity over the longer-term. While the numbers at stake from the Argentina sale sound huge, this is very much in-line with recent disposals, including the Canadian and French retail businesses.
It’s a day of headaches for big tech, with Nvidia facing a trademark lawsuit in Texas. Financial-technology company, Modulus Financial Engineering, wants to force Nvidia to stop using the Modulus name. There are allegations of consumer confusion and brand infringement. Nvidia has enough resources to throw behind cases such as these, but the broader question is one of reputation. Its meteoric rise in recent years means regulators and corporate peacemakers will have eyes trained on their every move, so cases like this don’t amount to much on their own, but do matter if they start to stack up. If Nvidia is forced to stop using the name, the overall outcome on business performance is likely to be very limited.
Apple’s also in the hot seat as EU antitrust regulators size up its proposal, to ensure it complies with directives to allow Spotify and other streamers to promote alternative payment options, outside the AppStore. This case has been rumbling on for some time, and investors would like to see a line drawn in the sand. Apple’s enormous scale and ecosystem model means regulatory challenges like this are unlikely to be a thing of the past.
Despite intensified efforts to demand a ceasefire in Gaza, the oil price has risen again. After falling slightly, Brent Crude is now back above $90 a barrel as supply anxiety seeps through. The seemingly fruitless campaign to end the conflict has intensified things, at a time when investors are waiting for US inflation data, which will also have an impact on demand for the black stuff.”