The FTSE 100 is set to gain back some ground today as it looks to test the 10,500 level again. London’s leading index briefly touched a fresh intra-day high yesterday, boosted by Nuveen’s bid for UK fund manager Schroders, but commodity price gyrations and weak UK GDP data saw the index end the day down.
With nerves running high, certain defensive sectors seem to be performing relatively well, with UK-listed utility and healthcare stocks having a good run of it this week. It’s been a bumpier ride for UK bank stocks, but a profit beat by NatWest, coupled with an upgrade to its longer-term capital efficiency targets, could help lift sentiment today.
Gold and silver are back in positive territory after some wild swings on Thursday. Silver felt the worst of it with a slide of over 11%. Increasing doubts around the pace of future interest cuts are likely to be one driver. But with volatility in risk assets running high, there could also be some forced selling as traders, particularly those that use borrowing to amplify returns, scramble to cover losses in other asset classes such as equities.
US stock futures are down again this morning. All of the major indices fell yesterday, led by the NASDAQ, which lost 2%, while 10-year treasury yields dropped to 4.11%, the lowest level seen this year, also reflecting the risk-off sentiment. Sentiment is proving hostage to the release of new AI-powered enterprise applications, and fear for now looks to be a greater driving force than rationality.
But there’s still capital on tap for the drivers of this latest technological revolution, with Anthropic raising $30 billion in a private round that’s seen its valuation double in just a few months. It’s built a revenue base of $14 billion in less than three years and could find its way to a stock market listing later this year.
The ever-increasing demand for computer processing power means there’s little chance of a let-up in infrastructure spending any time soon. Applied Materials, a key supplier of equipment and services to chip manufacturers, has beaten first-quarter earnings forecasts and come out with a second-quarter revenue guide of between $7.15 billion and $8.15 billion, which at the mid-point is 8% higher than market forecasts, as it benefits from the acceleration of investment into AI. The shares gained more than 13% in after-hours trading.
Hopes of a US rate cut next month are now below 8% down from over 18% just a week ago, after stronger-than-expected US jobs data earlier this week. Inflation’s the number to watch today. January core CPI inflation is expected to rise 0.34% over December, with the annualised number forecast to fall from 2.6% to 2.5%, the lowest level since March 2021. The key question is whether labour market strength can continue to build without injecting unwanted heat into the economy. Given the high tension levels on Wall Street, markets are likely to be more sensitive than usual to a miss in either direction.
Brent Crude prices have stabilised at around $67.4 per barrel after losing 3% on Thursday. The International Energy Agency cut its demand outlook for 2026 by 9% to 850,000 barrels per day, while supply disruption from cold weather is expected to be only temporary, meaning supply growth estimates have been trimmed only slightly, from 2.5 to 2.4 million barrels of daily output.
By Derren Nathan, Head of Equity Research at Hargreaves Lansdown
