- FTSE 100 opens down.
- Tech bounce leads US rally, as investors eye NVIDIA AI chip for Chinese market.
- Tesla hints at the rise of the robots.
- Wiz hits stop button on Alphabet deal in favour of IPO.
- Compass Group’s guidance heads north.
- Brent crude steadies at around $82.30 after price slides on weak outlook.
Derren Nathan, head of equity research, Hargreaves Lansdown:
“After a pedestrian start to the week, the FTSE 100 has ticked down slightly this morning. That’s despite US markets having their best day in weeks as big Tech overcame the recent stutter in the sector’s relentless rise. In a common theme, microchip king NVIDIA led the charge, climbing nearly 5% after reports broke that it was working on a version of its yet to be launched Blackwell processor that would comply with export restrictions to China. But that’s a pretty thin premise on which to add about $140bn of value.
The likely nomination of Kamala Harris as the Democratic Party’s presidential candidate and subsequent drop in former President Trump’s probability of regaining the White House may also have had a hand in the market’s positive uplift. The doubts Trump raised last week about defence commitments to Taiwan, the semiconductor manufacturing hub, saw sector valuations take a hit. But it’s important to remember that, for now, Trump remains the favourite to be sitting in the Oval Office at the end of this year.
Tesla was also in the 5% club yesterday, coming back from the dip seen at the end of last week. But overall, markets are approaching today’s second quarter results in an optimistic fashion, with the stock up around 38% in the last month. After better-than-expected electric vehicle deliveries, confidence is running high, but to what extent this has been driven by discounting remains to be seen. The lesser-known energy storage business is also enjoying strong momentum.
But ever the entrepreneur, Elon Musk has dangled another carrot from his dream of bringing tomorrow’s world a day closer. This time it’s the prospect of humanoid robots working on Tesla’s production lines as early as this year, with external sales possible for 2025. Alphabet, the owner Google and YouTube is another Magnificent 7 name reporting later. My colleague Matt Britzman, senior equity analyst at Hargreaves Lansdown, shares his thoughts on the news that Wiz has called off its $23bn deal with the Google parent below.
With precious little in the way of economic news on the horizon for today corporate earnings are likely to be the main driver of sentiment. The balance may swing the other way later in the week as attention turns to the US PCE inflation numbers and their implications for the timing of rate cuts by the federal reserve bank.
Contract caterer Compass has been feeding more mouths in all its regions in the third quarter with organic sales growth of 10.3%. There are underlying structural drivers feeding demand for outsourcing and that’s playing into the Group’s hands Regulation, and the value that bulk procurement offers are but a few.
It was encouraging to see volumes driving the strong organic growth in the quarter, but with close to $1bn spend on snapping up competitors (net of disposals) so far this year investors should also see a revenue impact from the acquired businesses. Meanwhile Compass is sticking to its commitment to complete the remaining $200mn of its buyback programme this year.
Today’s guidance sets a minimum expectation just above consensus forecasts. Organic revenue growth is now expected at over 10% and underlying operating profit at over 15%. Should current momentum continue into the final quarter the full year outcome is likely to do a little better than the baseline. Net new business growth which is a more forward indicator has also accelerated, painting an encouraging picture for the longer-term.”
Brent Crude prices are flat today at around $82.30 a barrel as they hover around their one-month low, weighed down by concerns about softening demand and the potential for a surplus in production by the middle of next year.”
Matt Britzman, senior equity analyst at Hargreaves Lansdown:
“Alphabet’s bold move to accelerate its stack in the cybersecurity space has come to a quick end. Wiz’s choice to instead grow revenue and look for an IPO will come as a blow, especially as the valuation offered by Alphabet was double the level at which Wiz secured its latest funding back in May. Alphabet is behind its key cloud rivals Microsoft and Amazon when it comes to offering a complete stack of cyber security products. With demand for cloud compute only going one way, and the risk posed by cyber attacks on the rise, having a strong set of cyber products will be a key attraction for enterprises. More M&A action in the cyber space feels inevitable
