The sun is shining on UK and European markets this morning, which are on track for a bright end to a positive week for major indices. Absent any major local earnings releases or economic news, UK and European markets are mirroring positive sentiment seen across the pond, as investors have largely shrugged off yesterday’s hotter-than-expected US producer inflation print (PPI).
The S&P 500 ended the day flat after an early dip, with investors rotating back into the reliable mega-cap names and pulling away from some of the smaller companies that had been performing well earlier in the week. Longer-term government yields rose, and the odds of a Fed rate cut in September edged lower. Still, markets remain almost certain of a cut next month, and US futures are trading higher this morning as investors maintain the glass-half-full mentality that’s been driving stocks higher in recent weeks.
Intel was the S&P 500’s best performer yesterday, with shares spiking on rumours that the US government might be considering taking a stake in the business. The strategic rationale makes sense from President Trump’s standpoint, as securing domestic chipmaking capacity is a key priority. For Intel, what a difference a week makes, as Trump pivots from calling for CEO Lip-Bu’s resignation due to alleged China conflicts to a much friendlier stance. Clearly, the meeting between the two went well, and direct government support could provide a much-needed boost to support Intel’s struggling onshore foundry business.
For the broader market, this is yet another example of how flexible the White House is willing to be in pursuit of its goals, with an unprecedented number of weird and wonderful deals being struck with giant US companies. Corporate political capital has never been quite so front and centre, and it’s the big players that can get an audience with the White House to carve out individual deals who stand to benefit the most.
Oil prices are trading lower this morning, with Brent hovering around the $66.60 mark. Traders have turned cautious ahead of today’s meeting between the presidents of the US and Russia. A failure to reach a deal over Ukraine could force Trump’s hand, as he’s been vocal about severe repercussions if negotiations fall through.
By Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown.
