- FTSE 100 opens slightly higher after mixed messaging from Federal Reserve
- Chip and consumer giant, Samsung, is expected to post significant profit improvement amid demand rebound
- Vodafone’s merger with Three referred for in-depth competition probe
- Oil hits highest levels in five months
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“The FTSE 100 has squeezed out some gains following a mixed trading day yesterday. There’s limited corporate news to move the dial, with Federal Reserve comments from yesterday a main driver of sentiment today. Jerome Powell once again said that there was no rush to cut interest rates, although he did signal a cut would be coming this year, but that this is wholly dependent on economic progress. The UK market is also holding on to the fact that UK manufacturing returned to growth for the first time since July 2022.
The market’s expecting big things from chip-giant, Samsung, ahead of results. Samsung is the world’s biggest maker of memory chips, as well as TVs, and higher chip prices have caused a wave of enthusiasm. Analysts expect quarterly operating profit to be the highest it’s been in over a year, in a sign that the worst of weaker consumer sentiment could be easing. Waning demand for electronic gadgets has dented the big players in recent times and it’s a relief to see this potentially reverse. Although memory chips are lower margin, the scope of the alleged demand rebound means profits are being held up. The average price of its smartphones is also expected to have jumped, which has positive read across for others in the space like Apple. That said, there remains a great deal of uncertainty and any missteps on Friday will likely spook the market. This of course comes after a worrying week for chip makers following Taiwan’s Tsunami. The overall impact from a commercial standpoint looks to be limited, with Nvidia confirming supply won’t be affected. Still, the events work as a stark reminder of how quickly outlooks can change.
The UK regulator, the Competition and Markets Authority, has referred Vodafone’s merger with Three for an in-depth competition probe. Should the deal go ahead, there are concerns it would lead to a poorer outcome for customers. The motivation for the merger stems from the fact that scale is one of the few levers telecoms can pull in order to generate growth, given that traditionally the only real differentiator is price, leading to a tough hill to climb for margins. The combination of the businesses would mean there were only three mobile operators in the UK, and this is an element that has flagged the CMA’s attention. The outcome from this won’t be known until mid-September, and there will be little to move Vodafone’s share price between now and then as this is the main sentiment driver.
Brent crude is heading towards $89 a barrel, hitting levels not seen in five months after OPEC+ reiterated its supply policy. At the same time, the US demand outlook looks very healthy and broader supply disruptions from global events continue to add to the anxiety.”
