- Brent crude dips as hopes creep up that a truce in Gaza is close.
- Jeremy Hunt loses some tax-cut wiggle room ahead of Autumn Statement
- AI remains the biggest craze in town, with Microsoft reaching record highs.
- All eyes on Nvidia results, which are expected to show another record quarter
- Fed minutes will be a draw later as investors assess the path ahead for rates
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Hopes that Hamas and Israel are inching towards a truce agreement in Gaza are easing concerns of further geo-political fracture, helping to push down oil prices after recent gains. Brent crude has dropped below $82 dollars a barrel, further depressed by expectations of a slowing global economy and with concerns retreating about the conflict in the Middle East widening. The FTSE 100 is flat in early trade with oil giants Shell and BP retreating. However, the threat of fresh production cuts resulting from OPEC+ meeting next weekend is keeping a floor on crude prices.
UK Chancellor loses wiggle room
The latest government borrowing figures won’t pop the balloon of Jeremy Hunt’s expected tax-cut party on Wednesday, but it does squeeze his wiggle room a bit. Public sector net borrowing came in at £14.9 billion, higher than the OBR forecast by £1.2 billion. However, given that borrowing during the fiscal year to date is still almost £17 billion, he will feel he has the space to offer sweeteners. Although tax receipts are still flooding in at higher levels, as more people are nudged into higher bands, government spending overshot expectations in October. Debt interest payments were more painful than expected, coming in at a whopping £7.5 billion. This is the highest interest payable in any October since monthly records began. Longer-term borrowing costs have retreated from the super-painful highs of a few weeks ago, but 30-year gilt yields are still hovering around 4.5%, at 13-year highs. It shows why the government is still nervous about incurring the wrath of bond vigilantes, but arguably borrowing to invest for the longer-term, in infrastructure and green energy would not spark the same response as the Truss plan for a short-term stimulus of unfunded tax cuts.
AI hopes fuel Wall Street gains
AI continues to be the biggest craze in town, with tech giants on Wall Street gaining fresh ground as investors assess their huge headstarts in the race to harness the power of big data and machine learning. Microsoft climbed to fresh heights as Sam Altman, the wunderkind of the moment, joined the ship having left Open AI in an acrimonious fashion. Eyes are now swivelling to Nvidia’s results out later, and just the anticipation is sending the stock higher. Investors are expecting another record-breaking quarter, with a three-fold uplift in sales expected to meet frenzied demand for its high-speed processors. While orders are expected to keep coming in at a super-rapid click, there still could be snarl ups ahead in meeting demand due to supply chain issues and export restrictions to China. So forward guidance will be poured over in minute detail to assess how the company will be able to navigate potential bottlenecks ahead, and they’ll be acutely sensitive to any tiny signs of frenzied demand waning. The risk is that some companies who’ve feared shortages may have over ordered, so just how demand will settle in coming years is far from clear.
Fed minutes in focus
On the wider economy, there are concerns of fresh struggles ahead, US consumers are already feeling the pinch, with scant relief offered by retreating inflation, given prices overall are still rising, having taken giant strides upwards over the past 18 months. A fall in retail sales just ahead of the crucial Thanksgiving and Christmas season has fuelled hopes that interest rate cuts could come sooner rather than later. Attention will turn later to the minutes released from the last sitting of the Federal Open Market Committee to assess policymakers’ stances. The Fed has made it clear, it’ll be highly data driven going forward, so this backward-looking sentiment reading might not pull a big punch.’’
