Market report: Footsie opens up, Nvidia’s chip deal with Trump, Tesla’s UK power ambitions
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There’s a small surge of Monday motivation for the Footsie, with the index opening higher in early trade. A pulse of positivity also sent stocks on Wall Street back towards record levels on Friday and US indices are set for a higher open as optimism continues to swirl. But there could be a swift change in sentiment. The focus will be on US inflation numbers out this week, a key determiner for the Fed’s interest rate decision next week. With Trump’s tariffs set to make swathes of goods more expensive for American consumers and businesses, investors will want to see to if higher prices are landing and what the outlook is likely to be ahead.
The Trump administration reckons higher prices and snarled up supply chains are an acceptable price to pay to encourage more US manufacturing and land revenue for the US Customs service. It now looks like US policy to rake in more funding is taking another twist. Chip makers Nvidia and AMD are reported to have agreed to pay out 15% of revenue from sales to China to the US government for their for advanced semi-conductors. There had been a ban imposed for ‘national security’ reasons but now it appears the lure of cash to boost Treasury coffers supersedes those worries. Last month Nvidia indicated that it expected the sales to resume, and now the price the company will pay has become clear. Nvidia’s Q1 revenue took at $2.5bn hit due to restrictions on H20 sales to China, but it clearly believes the 15% contribution is well worth it, to keep access to the vast and fast developing market. The unusual arrangement is another example of a mega tech company acquiescing to the US adminstration’s demands, to gain an upper hand as trade relations are redrawn. It follows on from Apple’s announcement of a $100bn investment in US manufacturing.
Tesla is looking to diversify further into the electricity market by lodging an application to power homes in the UK. Although its EV sales have dipped sharply this year, it still boasts significant car ownership in the UK and has sold thousands of home storage batteries here. This could mean Tesla Electric has access to a willing customer base, especially if it follows the model of its business in Texas which allows owners of its EVs to charge their cars cheaply and pays them for feeding surplus electricity back to the grid. It’s another example of Tesla shapeshifting away from being a car maker to an infrastructure and robotics giant.
Trading over recent weeks hasn’t enabled landscaping products manufacturer Marshalls to shovel away a disappointing outlook. It warned at the end of last month that activity levels in its key markets had softened and the forecast isn’t any brighter. It reported a 46% drop in pre-tax profit to £11.7m and reiterated that the landscaping market remains challenging, with such projects seen as icing on the cake rather than the core ingredient of big building projects. Nevertheless, revenues in its building products and roofing business did increase by 4% and the company spies opportunity ahead in the government’s commitment to new housing and infrastructure investment.
The streamlining of Rolls Royce’s operations continues with the offloading of its UK pensions scheme to Pension Insurance Corporation. This will transfer the pension obligations of 36,000 members to the insurance specialist and will lighten the load on Rolls Royce’s balance sheet. It’s one of a string of transfers in recent years, with higher interest rates having reduced the value of liabilities in pension plans, making the deals easier to snare.
There are hopes that Trump and Putin’s meeting in Alaska later this week will help push the Ukraine conflict to a resolution, which is helping calm concerns over energy supply disruptions. Threats of extra tariffs on India, which buys Russian crude, pushed up oil prices, but they are in retreat amid expectations the meeting could pave the way for the lifting of sanctions on Russia. As traders mull the effect on global growing in the tariff era, forecasts for lower energy demand are also acting as a drag on prices, with Brent Crude hovering around $66 a barrel, the lowest in two months. Gold prices have also retreated a little amid hopes for an easing of geo-political tensions. But there is still uncertainty hanging around the market, surrounding concerns about gold bar imports into the US being taxed. This sent the wave of turmoil through the US gold futures market on Friday, pushing prices to record levels. Traders are waiting for further announcements after the White House spokesman said that there would be an executive order issued to help clarify misinformation.’’