- FTSE 100 is set to struggle to find form, following share price falls in Japan and the US amid interest rate concerns and the Taiwan earthquake.
- Brent Crude is above $89 a barrel, near highs not seen since October, amid high Middle East tensions.
- Tesla slips further away from Magnificent Seven pack after sharp sales decline.
- Nationwide is told to pull ‘misleading’ bank closures advert by advertising watchdog.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The Taiwan earthquake has turned markets more skittish, with investors already unnerved by data pointing to inflation staying stubborn in the US. The Nikkei fell to its lowest level in two weeks, following a tsunami warning for Japan’s Okinawa island prefecture. It looks set to be hard going for the FTSE 100 to regain its recent mojo and head back towards breaching record levels. After cantering past the psychologically important 8000 mark on Tuesday, the index lost ground and is set to struggle to find form as uncertainty grips investors. Setting a fresh all-time high remains frustratingly elusive, despite the uptick in crude prices, which are set to benefit energy giants.
Oil prices are holding close to highs not seen since October, as geopolitical tensions remain fraught amid continued violence in the Middle East, with Iran vowing revenge for an attack on its embassy in Syria. This has sparked fresh concerns about potential supply disruption in the region. Traders also expect OPEC+ countries to agree to maintain reductions to output at a ministerial meeting later. Robust manufacturing snapshots in China and the US, from purchasing manager index readings, have also boosted expectations of higher demand going forward.
With American factories churning out more goods, it’s another piece of the picture pointing to a highly resilient US economy in the face of high borrowing costs. It’s led to fresh risk-off sentiment spreading, as worries brew about inflation staying doggedly above target and the Fed being potentially forced to hold off from cutting rates by as much as previously forecast this year. As concerns about higher interest rates lingering for longer percolate, Wall Street is set for a lacklustre session, as investors also assess geopolitical conflict and the potential repercussions of natural disaster in the East China Sea region.
Ongoing disruption in the Red Sea is just one of the production issues plaguing Tesla, which have contributed to a 20% drop in sales quarter on quarter, with deliveries of just under 387,000 vehicles coming in significantly below market expectations. Tesla may have pulled off the tricky manoeuvre of stealing back the crown as the biggest seller of electric vehicles from Chinese rival BYD, but it’s not been enough to arrest a sharp fall in the share price as investors expressed disappointment with the deliveries number. Elon Musk’s electric car giant has faced a pile on of problems, not just from tougher competition in China, but waning EV sales globally and production issues at its mega factories. Although its ability to swerve back to lead the EV pack in terms of global sales is testament to the company’s brand power and cachet of its vehicles, it’s looks set to be a tough road ahead, as other rivals jostle for position amid softer demand for EVs. Its stock market valuation, which has more than halved since the peak in October 2021, reflects the challenges the company faces.
The fabled Magnificent Seven group of tech giants is now splintering off as a playground style popularity contest evolves, based largely on firms’ artificial intelligence credentials. As the famous five of Nvidia, Meta, Microsoft, Amazon and Alphabet head off on an AI adventure, Tesla and Apple still appear to be searching for the right clues to take advantage of this new world of opportunity. Tesla is investing heavily into software and AI but that’s putting margins under huge pressure and exactly where they will settle is still highly unclear.
Nationwide has found itself in hot water over its claims about rivals closing branches. Its ad has been banned by the Advertising Standards Authority for misleading customers, with the watchdog pointing out that Nationwide had closed branches, and in fact had closed more than Santander, during the 12 months before the TV campaign.
The old adage all publicity is good publicity though, probably still rings true for this stunt. The Building Society has jumped on the opportunity to shine another light on its pledge promise not to close branches, which has been extended until 2028. But with more and more customers, particularly those who are not digitally confident, feeling shut off from accessing bank accounts in person, customers are going to stay highly vigilant and increasingly willing to call out claims that don’t stack up with reality.’’
