Market report: Trump’s Truth Social takes off, H&M sales growth returns…
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Caution continues to reign after another day of decline on Wall Street with the FTSE 100 not expected to make significant moves in early trade. Many investors seem a little wary as New York indices hang near record levels, trade tensions between the US and China bubble and key data out on Friday threatens to show US inflation is still stubborn.
President Trump may have theoretically bolstered his political war chest, with his Truth Social platform popping in valuation, but the locks will remain in place for another six months, given clauses stopping him from selling shares. There is likely to be significant volatility ahead as a share buying frenzy among his supporters may wane, and investors dig deeper into the fundamentals. Truth Social now has a market cap of just shy of $8bn with around 5 million active web and mobile users. By contrast Reddit, which went public last week now has a market cap of $10.3bn but has 73 million active users, a number that’s steadily increased over the years. The floatation will mean $300m can be poured into the platform, which is set to serve as a pulpit and willing audience for his electoral sermons but it’s hard to see where growth will come to justify this price tag. The site will have its work cut out to compete against more established platforms which keep attracting eyes on screen due to the network effect of already having high numbers of users.
Oil prices have dipped back, with Brent Crude trading at $85 a barrel, as traders weigh up continuing supply concerns amid data showing that stockpiles rose by more than expected in the United States. Production in Russia is still under scrutiny, with Ukraine targeting refineries affecting around 12% of processing capacity, and Moscow ordering an output cut in the second quarter of the year to meet OPEC reduction pledges. But data from the US Department of Energy shows that stockpiles at the Strategic Petroleum Reserve rose by another 0.7 million barrels, to 363 million, the highest since last April. However, renewed attacks by Houthi rebels in the Red Sea over the past few days and the absence of a ceasefire in Gaza are set to help keep a floor under prices.
Attacks in the Red Sea are still an obstacle to navigate for retailers with risks being closely monitored. H&M says it’s acting to minimise the impact on product availability, freight costs and stock levels. For clothing chains operating in a highly cost-conscious environment with fashion fans still seeking out value deals, this is another potential operational headache. The company seems pretty confident though that it can limit the impact, given its aim to reach a 10% operating profit margin over the current year. H&M has been navigating a world of cautious shoppers with style, and although sales fell by 2% in the last quarter, it was a better performance than expected and helped deliver operating profits above forecasts. H&M and its teams of designers in Stockholm have their finger on the pulse of what high street shoppers want to wear. As cost-of-living pressures have started to ease in key markets, sales are on the up again, lifting 2% since the start of March.
With our lives increasingly being run digitally, concerns are brewing about the number of listed-companies hit by payment faults, putting apps out of action. Barclays is the latest to be hit by glitches which meant customers were unable to make or receive payments. The operational headache comes hot on the heels of other technical issues, which crashed systems at Greggs, Sainsbury’s and Tesco. McDonalds was also hit by outages worldwide. Consumers are highly reliant on the smooth running of systems, and ensuring that these really will be one-off events, rather than fundamental weaknesses in systems will be crucial. While it’s still far from clear exactly what has caused these outages, it’s clear vulnerabilities need to be tightened up. Ensuring the security of systems is set to become even more important as companies embrace AI models with open arms, enthused by the efficiencies they can deliver. But with cyber agencies warning that AI systems are subject to new types of threats, firms will have to dedicate resources towards minimising the risks they face whether they are mischievous infiltrators or hackers sponsored by foreign states.’’
