- FTSE climbs as UK exits recession, with GDP growing for the first quarter
- Gold reaches new record highs on growing uncertainty
- Oil price remains above $90 a barrel
- AstraZeneca’s controversial pay packet survives vote, despite shareholder concern
- UK watchdog signals concerns over big-tech’s AI dominance, as tech stocks rebound after inflation sell-off
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“UK blue chips have risen in early trading as it emerged that a technical recession is a thing of the past. Gross domestic product rose 0.1% between January and February, which was in-line with expectations and thanks to growth in manufacturing, especially in utilities. These figures mean the UK economy is likely to have expanded in the first quarter overall, marking an end to recession. With that said, the levels of growth being displayed aren’t very inspiring, particularly for our large services industry. Falls in construction activity also indicate a broader malaise the UK is yet to shake off. We’ve known for some time that major housebuilders have been building fewer homes, as people wait for finances to improve before making large financial decisions. Heavy rainfall has also dampened construction activity, as repair and maintenance work were delayed. All-in-all, the rate of economic growth has slowed, and there’s still a lot of extra coals needed to stoke the UK’s engines.
A desire for safe-haven assets has pushed the price of gold to touch new highs, at $2,390 an ounce. Stickier-than-expected CPI numbers from the US, together with elevated geopolitical tensions, means the general sense of uncertainty has increased. Oil is another commodity being pushed higher by rising worries. Brent crude is set for a weekly loss, but remains over $90 a barrel as conflict in the Middle East shows no sign of abating. These upwards moves from cyclical markets serve as a potent reminder that wheels can turn quickly – the UK has large exposure to cyclical industries and it’s crucial not to have too many eggs in one basket.
AstraZeneca’s controversial pay package for its chief has been waved through, despite well over a third of voting shareholders opposing the new policy. The changes mean Sir Pascal Soriot could be paid up to £18.5mn this year. A sympathetic view of the situation would say Soriot has steered the Astra ship onto an enviable course, with performance, especially in its crucial rarer treatments, doing very well. A pharmaceutical giant is nothing without its pipeline, and the highest echelons of the firm clearly believe Soriot is the right man to future-proof the business.
The UK watchdog has signalled concerns about the dominance of big tech in AI. Questions centre around the power of a small number of firms, which control the large language models behind the likes of ChatGPT, as well as controlling critical resources like computer power and raw data. The implications of these concerns are unknown for now, but could result in deals or new partnerships becoming more difficult for the dominant few. Regulatory risk has long been a primary concern for companies reliant on the AI boom, but this alone is unlikely to move the dial too much. In some instances, these companies have close to $100bn of cash sitting on the balance sheet, which is more than enough to stomach policy changes. The mood music in the tech sector is actually pretty bright today, as some of the big hitters recover from the sell-off seen immediately after Wednesday’s US inflation data. While hopes for faster interest rate cuts have faded, the bull case for these stocks looks far beyond the short-term macro environment.”
