Market Report: Asian markets fall on Nvidia tariff shock, Bunzl slumps
Steve Clayton, head of equity funds at Hargreaves Lansdown: “Asian markets were pressured overnight after the US placed additional curbs on Nvidia Corp’s ability to ship advanced silicon chips into China. Shipments of Nvidia’s H20 chips, previously allowed into China are now to be restricted, creating uncertainty about just where the US/China trading relationship was headed. Technology companies in Asia led the declines, with Chinese tech companies listed in Hong Kong tumbling by over 4%. Nvidia itself dropped 6% in US after-hours trading. Japan’s Topix Index dropped over 1% before paring losses, whilst the Hang Seng index in HK fell by 2.2%. Shares in Korea and Taiwan also declined.
The US also announced a probe into the trading of critical minerals and rare earths to see if levies needed to be introduced. In the current environment, few would bet that the probe will conclude that no, they do not.
Barratt Redrow released a trading update, confirming a generally positive backdrop to trading in the wake of the two companies’ merger. The group’s financial year ends on June 30 and reservations to date leave the group with around 93% of its budgeted revenue for the year already secured. Cost growth looks under control and the group are working to achieve their targeted post-merger synergies, with some further branch closures expected. The combined land banks have allowed additional sites to be progressed and overall, Barratt Redrow expect to have opened 45 new sales outlets by June 28, compared to what the two businesses would have achieved as stand-alone operators. The shares edged up a fraction in early trade.
Rio Tinto’s Q1 production report is largely as expected, with the exception of their Australian iron ore business in the Pilbara. “Extreme weather events” have held production back and Rio say that overall iron ore production in Q1 will now be at the lower end of their earlier expectations. The stock dropped a little more than 1% at the open.
Bunzl shares look set for a tough day after the group warned that weak performance in its core US distribution division would hold back progress with both revenues and margins set to disappoint. This comes before any direct impact from tariffs, or any wider economic slowdown as a result of their introduction. Bunzl have suffered a “significant decline in adjusted operating profit” in their North American division, with weakness concentrated in their operations serving the foodservice and grocery customers. The group has been making big efforts to develop its own-label offering to customers and this has not gone to plan. Underlying sales are down 0.9% year to date for the overall group and operating margins are expected to be modestly below 8.0% for the year. That requires a big improvement in H2, because first half margins are now seen coming in around 7.0%. Mindful of a challenging macro environment the group are pausing their buy-back programme. The market has so far taken the news pretty badly, with the stock opening almost 20% lower.”