Market report: UK stocks rebound, Entain betting boost and Apple’s AI gamble

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The downbeat mood which has been percolating through markets has eased off, with the FTSE 100 staging a comeback in early trade. Investors appear to be shaking off worries about a deeper global economic slowdown, helped partly by a shift upwards in oil prices. This rebound is likely to be part of a pattern of volatility, rather than a meaningful change of sentiment, given the concerns still lingering about a potential US recession and continued weakness in China. Although China’s inflation rate has edged up, with the economy veering away from deflation, the headline rate of 0.6% wasn’t as high as expected, indicating slow progress.

The weaker than expected US jobs snapshot on Friday sparked a fresh sell-off last week, which reverberated into trading in Asia. Tech companies with heady valuations have borne the worst of the risk-off sentiment, and semiconductor stocks saw fresh declines, with Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co falling by more than 2%. Although US inflation appears now to be largely tamed, the focus has switched to just how deep a downturn could be in the world’s largest economy.

The FTSE 100 is home to more companies selling wares which are likely to be more resilient in a downturn, like consumer staples and pharmaceuticals, but it’s still not immune to negativity over growth prospects.  However, sentiment appears to have picked up, with mining and energy stocks among the climbers. Oil prices have gained back ground, but are still hovering at multi-year lows. Brent crude gained 1.26% to trade around $72 a barrel. But given that it followed an 8% plunge last week, oil prices are still at levels not seen since December 2021.  With the US jobs data painting a picture of a deeper slowdown on the way in the US, it’s piled on fresh worries about the demand outlook, given the weakness already prevalent in China. However, a potential hurricane is threatening to disrupt production on the US Gulf coast, which is giving support to prices.

Shares in Entain jumped 5% in early trade as investors were given a much-needed boost by its assessment that revenue growth in the second half of the year was ahead of forecasts. The summer of sport clearly enthused punters to make bets, caught up in a wave of excitement amid the Euros and the Olympics. It’s meant year-on-year growth has returned to its online business in the UK and Ireland so far in the third quarter. That’s not given management enough confidence to raise guidance yet though. However, it may indicate that marketing and product development efforts are bearing fruit which have helped drive more players to Entain’s online betting and gaming websites.

Apple will be hoping its brand power and AI promises will offset consumer reticence about spending big in uncertain economic times. A highly anticipated launch of a range of products will land later, with AI features set to be central to the new offerings. The tech giant is playing catch up in the smartphone market, to some extent, given that Samsung and Google have already introduced handsets with more artificial intelligence tools embedded. The big bet is that the AI buzz generated by any new Apple Intelligence features will prompt a domino effect of mass upgrades around the world. To some extent this is a gamble, particularly as Apple seems to be throwing the AI kitchen sink at its hand-held devices, while pulling the plug on other projects like the AI car. Clearly this is a this is a key moment for a business that’s struggled to deliver real innovation in recent times and its impressive brand power, which keeps legions of fans loyal, should help it maintain its edge, and give it that extra bit of momentum amid consumer wariness.

There will be relief among town and city centre managers that fresh holes threatening to appear in high streets look set to stay filled for now. The remaining 113 Body Shop stores have been rescued from administration. The rejuvenation of what used to be the beauty jewel of the high street will be welcomed by plenty of nostalgic shoppers, eager to see a revival of the brand’s iconic ranges. It’s not exactly clear what direction the new consortium, led by British businessman Mike Jatania, will take the chain. However, the announcement that the new CEO will be Charles Denton, formerly of Molton Brown, may give an indication that the Body Shop could be heading upmarket, toward the semi-luxury and not the cheap and cheerful end of the market. Refocusing on the brands eco-credentials, with refillable bottles and sustainable products, would be a sensible move to make. But if there are plans for a makeover of the pungent but iconic dewberry scent, it is likely to be more subtle this time around.”