- Taylor Wimpey shares fall amid profit fall and disappointing outlook.
- Vodafone confirms it’s in talks to sell its Italian operations.
- Chinese property woes in focus as Country Garden faces potential liquidation.
- Stocks set to tread water ahead of key US inflation report.
- Zoom shares jump on strong results and unveiling of AI companion.
- Apple to double down on AI investment as it reportedly axes plans for EV development.
- Tata confirms the UK’s biggest EV battery manufacturing plant will be built in Somerset.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Housing woes are front and centre today as investors reflect on the difficulties of UK housebuilders and a deepening property crisis in China. The FTSE 100 has been on the back foot in early trade, with little to ignite a wave of buying, as investors also await a key inflation report stateside.
Housebuilder Taylor Wimpey has underlined the pressure high borrowing costs have put on sales rates, while inflationary winds have whipped up costs. Shares fell in early trade as investors digested the 49% plunge in annual profits but also the prospect of clouds staying low over the housing sector in the coming months. The outlook has disappointed with the company expecting a further fall in completed home sales and the squeeze on profit margins continuing.
China’s property house of cards has wobbled again as the woes of another huge real estate developer Country Garden come into sharp focus. A liquidation petition has been filed against it in Hong Kong by one of its creditors, Ever Credit Limited. The development threatens to reignite concerns about the fragility of the sector and cast doubt on efforts made by authorities to shore it up and stop contagion. Already Evergrande has been ordered to be liquidated by a court in Hong Kong and is being forced to go through a restructuring process. It’s clear there is no easy exit from the debt quagmire these companies are mired in, and it indicates that restoring confidence to the sector is going to be a drawn-out process. The longer it goes on, and property values stay depressed, it is also likely to affect consumer wealth perceptions and continue to act as a drag on the wider Chinese economy. Iron ore prices, which had been resilient are coming under pressure, sinking to four-month lows, amid fresh deterioration in the prospects for the property sector and concerns that indebted local governments in China may scale back infrastructure spending.
Vodafone shares lifted in early trade as it confirmed it’s in advanced discussions with Swisscom about the sale of its Italian arm. This is part of Vodafone’s evolving strategy to improve its perfomance against its peers. The deal would follow hot on the heels of the sale of its Spanish division. But low sales growth relative to spending is still set to weigh on the company even as it offloads underperforming divisions.
Stocks on Wall Street are largely set to tread water in the session ahead with little to spark a fresh wave of enthusiasm before a highly anticipated reading on US inflation. The Personal Consumption Expenditures Price Index, the Fed’s preferred measure, is expected to show that inflation is being stubborn, with a small uptick expected. The path down from sky-high price rises was always expected to be a bumpy one, but America’s economy has proved even more resilient than forecast with a strong labour market boosting consumer purchasing power. The exuberance on Wall Street, fuelled by AI enthusiasm, appears to be helping as rising stock portfolios instil more confidence to spend among Americans.
Zoom has helped bang the revenue beating drum, surpassing expectations with its fourth quarter results which show continued growth in high fee paying enterprise customers. Investors were clearly enthused about how Zoom is now riding the AI wave, as its shares surged on Wall Street after its fourth quarter results showed how the integration of generative Ai into its offering is paying off. It’s launched an AI companion, a new digital assistant aimed at enhancing team collaboration, providing after meeting summaries and chat composing prompts.
Given Apple’s secrecy around its EV project, it’s not surprising the company is staying silent on reports that its quietly shelved the scheme to double down on its AI efforts. The tech giant is following a trend, with investors’ enthusiasm for electric vehicle investments waning, amid the frenzy for all things AI. EVs have been harder to sell amid cost-of-living headwinds, and margins have been squeezed to ensure manufacturers cling onto market share. It’s partly why Tesla has been failing to keep up with the Magnificent Seven pack. Apple is recognising that attempting to swerve into the fast lane in an industry that’s ahead of the curve in developing EVs is a manoeuvre too far. It’s vital that Apple stays one step ahead in developing the tech people crave, to justify its products’ high price points, so fully exploring the opportunities AI presents for its future ranges is essential.
Still, AI isn’t the only game in town and there is still a recognition that to reach net-zero targets a mass transition to EVs is still crucial. Tata is now delivering a key part of the EV production jigsaw puzzle which had been eluding the UK. In a boost to the government, it’s confirmed that a site near Bridgewater in South West England will be the location of the UK’s biggest electric vehicle battery manufacturing facility. This will form the backbone of EV manufacturing in the UK, given that it’s expected to contribute almost half of the projected battery manufacturing capacity of the UK automotive sector. At a time when EV sales have dipped as a proportion of all vehicle sales, this finally sends a signal that the UK is fully open for business when it comes to the electric vehicle revolution and may help spur investment into charging infrastructure and encourage consumer take up.”
