Market update: BP’s profit falls, Bitcoin’s descent and AI winners and losers
Susannah Streeter, chief investment strategist, Wealth Club: ”The Footsie has taken a breather as investors assess hopes for a resolution in tense relations between Iran and the US, while also monitoring the drama on the UK political scene. Mining stocks have slipped back after precious metals erased some of their recent gains. Geopolitical worries are taking a bit more of a back seat as negotiations continue over Tehran’s nuclear programme. This has seen oil prices retreat slightly as immediate supply concerns ease, putting pressure on listed energy giants. BP’s results show that its annual profits took a hit after a fall in crude prices last year. The suspension of its share buyback scheme, combined with the weaker numbers has disappointed investors, and the promise of a ramp up in its cost-cutting drive hasn’t lifted spirits.
Bitcoin’s vertiginous descent continues as investors flee riskier assets. The cryptocurrency has been in freefall this year and has now dropped back below the psychologically important $70,000 mark. While there has been some bargain hunting after last week’s chaotic retreat, sentiment has turned lower again. The sell-off is affecting coins across the crypto sphere.
Crypto is a speculative asset class, and when jitters take hold – whether due to fears of an AI bubble, the prospect of fresh geopolitical conflict, or interest rates staying higher for longer, sentiment suffers. Institutional demand has also cooled sharply amid portfolio recalibration, adding to Bitcoin’s decline. The Trump bump has well and truly slumped, particularly given revelations about how the President’s family has been profiting from various crypto deals surrounding the venture World Liberty Financial.
Wall Street looks set to pause after another lift in the value of a raft of big tech players. Investors are shuffling the tech pack and dealing out the perceived winners and losers of AI adoption. Prominent software names remain largely depressed amid concerns that agentic AI tools will eat into demand for their services.
However, the leading listed architects of the artificial intelligence revolution, which provide the backbone for the technology, are benefiting from renewed optimism about their prospects. Nvidia, Oracle and Meta have all seen rebounds, but concern is lingering about the scale of investment being poured in without clear signs that returns are keeping up. This helps explain why Amazon is struggling to regain form. Microsoft has recovered some losses, but worries persist that its capital expenditure drive may not reap rewards quickly enough.
UK government borrowing costs have retreated slightly but remain elevated as speculation about Keir Starmer’s position continues. Cabinet members have backed him in a show of support following the furore that erupted after links emerged between former US ambassador Peter Mandelson and the paedophile Jeffrey Epstein.
However, intense speculation about Starmer’s future as prime minister continues, unnerving gilt investors. After past political volatility and frequent changes at the top of government, the UK has been suffering from a risk premium. The concern is that if Keir Starmer is ousted, there could also be a change of guard at the Treasury, potentially weakening adherence to strict fiscal rules on spending.”