Nvidia earnings anticipation, water sector warning and UK’s Brexit focus

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “London’s blue-chip index is set to stay on the front foot in early trade, helped by stocks on Wall Street eking out a positive finish, with little drama of note unfolding for Japan’s Nikkei, which has been trading flat. The biggest listed companies, with international businesses largely shook off the negativity which descended following Prime Minister Keir Starmer’s warning about an economic black hole facing the UK. However, the downbeat message weighed heavily on housebuilders, amid concerns that it could prompt fresh wariness among buyers. The PM’s whistle stop tour around Europe, to turn a corner on Brexit, might bring a sprinkle more positivity for exporters, but it’s unlikely to yield any immediate breakthroughs in terms of trade.

Investors are to some extent in wait-and-see mood ahead of the hotly anticipated results from tech superstar Nvidia, due out later. The chip giant is again expected to demonstrate that it’s firing on all cylinders, with another round of blockbuster numbers expected, fuelled by accelerating demand for its AI focused computing platforms. But a lot will also be riding on the outlook and guidance from the firm, with some uncertainty swirling about just how long it will be before rapacious appetite for its products is sated.

UK water companies have been feeling the pressure of being in the government’s sights. Keir Starmer stressed a determination to impose tough fines for sewage leaks and strengthening the power of the water regulator. Investors in listed utilities like Pennon and United Utilities have been on the back foot. A warning from industry lobby group Water UK that companies’ ability to improve services may be hampered by the cap on bill increases, will do little to bolster confidence. However listed utilities are in better shape compared to the likes of Thames Water, which is teetering on the edge of a financial cliff. Thames has already warned it’ll run out of its emergency life float next year, unless it gets more investment. The industry is concerned that the price cap will do little to persuade investors it’s worth pouring more money in. Ofwat is currently assessing responses to its draft decision.

Brent Crude is just under $80 a barrel, losing some ground after climbing sharply amid concerns about production coming to a halt in more oilfields in Libya. The disruption was announced by the government in Benghazi, amid a dispute with leaders in Tripoli, about who should lead the central bank. However, the oil stand-off between the rival governments is not expected to be long-term, and concerns about a wider production halt have dissipated a little. Nevertheless, high tensions remain in the Middle East, given the situation in Gaza, which are set to keep a floor under elevated prices.

‘’There will be some disappointment for Prudential investors, as new business profit fell 1.4%, hampered by continued weakness in China and Hong Kong. There had been high hopes that these markets would offer considerable growth prospects, with a swelling middle class demanding more financial products like health insurance. The reopening of the China-Hong Kong border helped Prudential last year, boosting demand for its products. But continuing Chinese economic headwinds are clearly a drag on its efforts to claw in more profitable business.”