Risk sentiment improves slightly, Nvidia results in focus and Tesco grows market share
- FTSE 100 opens higher as risk sentiment improves a little.
- Caution is set to dominate on markets ahead of the global central banks meeting at Jackson Hole this weekend.
- Brent crude dips back as worries remain about China’s slowdown and the impact on higher interest rates on Western economies.
- Tesco grows market share fending off the competition from discounters.
- A UK/India trade deal remains elusive, as the British trade secretary joins G20 ministers in India.
- PwC UK flags the political and economic upheaval as it reveals a drop in profit.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘”The FTSE 100 has sneaked into positive territory in early trade as risk sentiment has improved a little, but caution is set to dominate on financial markets as investors assess the prospects of high interest rates lingering for longer. Wariness has been rippling out ahead of the central bankers’ meet up at the Jackson Hole Economic Symposium in Wyoming this weekend. Investors will be eager for clues as to how long the fight against inflation will continue, where interest rates will end up and just how long they will stay at painful levels. While worries about the effect of an embedded price spiral are still brewing, partly due to super-strong job markets, there is also growing unease at the splintering impact on economies caused by the sledgehammer policy of hiking rates rapidly. Oil prices have dipped back again as investors assess the potential damage and take into account China’s slowdown, with demand expected to dip for the world’s top crude importer. The absence of further immediate policy measures from Chinese authorities to stimulate the economy is keeping a downwards pressure on prices, with Brent Crude trading below $84 a barrel.
Investors will also be keeping a close watch on PMI data out this morning, with the snapshot from purchasing managers across a raft of countries in Europe indicating to what extent demand across sectors is slowing, given the higher borrowing costs affecting company and consumer sentiment.
Focus will also be highly trained on Nvidia’s results later on Wall Street, and a jolt volatility is set to be sparked by the chip giant’s numbers and outlook. Nvidia’s valuation depends on confidence in the AI revolution and demand for its hi-tech chips and while it’s expected that this won’t have waned substantially, its stratospheric rise this year could make the stock vulnerable to any small set back. Guidance was for second-quarter revenues of about $11bn – so this is one benchmark to watch, while there will be keen eyes trained on what’s ahead for the company especially when it comes to potential stumbling blocks of supply constraints. . If the voracious demand for artificial intelligence technology shows little sign of abating, there is likely to be renewed enthusiasm for tech companies with their fingers in all sorts of AI pies.
Tesco’s razor-sharp focus on keeping prices down is helping it fend off rival discounters adeptly. The retailer’s huge scale is helping to power its value offering with deep-rooted nature of its supplier relationships also ensuring it can stay as competitive as possible. This is again evident in the latest data from from NIQ, the consumer intelligence company which shows Tesco’s market share increased marginally by 0.1 percentage point to 26.8%. Shoppers who remember to set out with the Tesco loyalty card tucked into wallets or present on their smartphones are big beneficiaries of lower prices, while those who forget to go armed are punished with much higher bills at the tills. Expanding the Aldi price match promotion is also clearly paying off, enabling Tesco to retain shoppers loyalty and discourage them from shopping around.
Hopes that the UK can give its very sluggish growth prospects a boost with a big trade win this Autumn are fading after reports that a major deal with India remains elusive. It appears that final negotiations have run into the long grass, with thorny issues such as visas for Indian workers still likely to be problematic. India clearly has huge untapped potential for British firms super-keen to export but currently weighed down in the competitive stakes by high tariffs. Unlocking the market could be a game changer, particularly for businesses who have seen previously robust exports to Europe twisted up in red tape. But with a hard stance on immigration, a red line the Conservative party is unwilling to rub out, firms are likely to need a lot more patience before there is a breakthrough. Trade Secretary Kemi Badenoch is visiting India for a meeting with G20 trade ministers this week, and although some piecemeal deals could be reached, the top prize still is likely to stay tantalizingly out of reach.
The accountancy and consultancy giant PwC UK has flagged a drop in profit this year as it grapples with a challenging landscape. Total group consolidated profit fell to £1.3bn for the year to 30 June, down from £1.5bn last year. Clearly the ongoing war in Ukraine, high inflation and punishing interest rates are still taking toll on business sentiment and the firm has highlighted the current backdrop of political and economic upheaval. Nevertheless, the partnership did take on new staff in the UK, lifting its headcount to more than 26,000 and the payout of £906,000 this year for more than 1,000 partners is still only a slight fall on last year’s record level.”
