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Home Banking Market Report: Global markets continue to tread carefully with Middle East tensions in mind

Market Report: Global markets continue to tread carefully with Middle East tensions in mind

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  • FTSE 100 hangs in at the open
  • Tate & Lyle issue acquisition and trading update
  • British Land raises £301mn to help buy seven retail parks
  • US markets wobble
  • OpenAI valued at $157bn
  • Brent oil continues to move higher
  • Tesco delivers a tasty set of results

Matt Britzman, senior equity analyst, Hargreaves Lansdown:

“The FTSE 100 has set aside global tensions and opened with a small bump this morning. There’s a string of company announcements to get through this morning, with the index currently being led by the energy sector as oil prices continue to move higher.

Tate & Lyle issued a short update this morning regarding the £1.4bn CP Kelco acquisition, giving investors more details to examine. This transaction won’t need a shareholder vote, but Tate was obligated to provide extra details, which they have today. There wasn’t anything too exciting in these figures. The one positive is that performance at CP Kelco has been on an improving path of late. This deal helps to accelerate Tate’s final transformation into a leading force in the speciality food and beverage solutions space. We also had some details on trading over the first five months, with volumes moving in the right direction and everything on track for existing guidance.

British Land has raised around £301mn from investors to help fund the purchase of seven retail parks for £441mn. Sites like this now make up around 32% of the entire portfolio, up from 18% just 18 months ago, and are core to British Land’s expansion strategy. There are two key takeaways here. The first is that the ongoing consumer shift from the high street to out-of-town retail locations is clearly a trend that companies are trying to take advantage of – we heard from Greggs earlier this week who is taking this approach for new store locations. The second is that the large-scale acquisition market for property giants is back open, after a period of low activity.

US markets were broadly flat in last night’s trading, and futures point to a soft opening later today for the S&P 500 as investors try to manage the tricky geopolitical backdrop. Not too surprisingly, energy stocks were offering some support as tensions in the Middle East continued to provide a tailwind for oil prices.

OpenAI has reportedly raised $6.6bn in its latest funding round, which would put the company’s valuation at a mammoth $157bn. Big names are supposedly getting in on the capital raise, from Microsoft to Nvidia, clearly still bullish on the future for arguably the company that kickstarted the AI revolution when it launched ChatGPT. Some reports suggest that OpenAI is running at around a $5bn annual revenue run rate, doubling each year. That suggests a valuation of around 15 times forward revenue, which isn’t completely crazy. Things get more interesting in the messy corporate structure, and whether the full transition to a for-profit company is now fully underway remains to be seen.

Brent oil is extending its recent rally. It is now trading close to $75 a barrel and rising for its third straight session. Escalating tensions in the Middle East, and the potential for Israel to launch a response against Iran, mean the market is still being driven by supply concerns as traders try to assess potential disruptions to oil production facilities or supply routes in Iran and the wider region.”

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

“Tesco delivered a tasty first-half performance to both customers and investors alike. Easing inflationary pressures have seen annual food inflation slow from 2.3% in July to just 2% in August, the lowest reading in nearly three years. On top of that, Tesco has continued to invest in keeping prices low in its value range to help fend off competition from the likes of Aldi and Lidl.

At the other end of the spectrum, the Finest range is helping Tesco poach customers off more premium supermarkets. Both of these actions have left Tesco on a high at the half-year mark, with the low prices meaning that Tesco’s been the cheapest full-line grocer for nearly two years, which is luring more price-sensitive customers in the door. Growth is being led by more customers taking items off the shelves which is more than offsetting the lower goods price growth.

The strong volume-led growth has given management the confidence to upgrade full-year profit guidance. With a strong start to the year and the all-important Christmas period just around the corner, this upgraded target looks well within reach. There’s plenty of cash pumping around the business too, which is helping to fund share buybacks and a double-digit increase in dividends. Tesco’s putting up a great fight in the battle for consumers’ hard-earned cash. Its market-leading proposition and income potential shouldn’t be overlooked, and despite the run-up in share price this year, there’s opportunity for investors.”

The Non-Executive Chair of Hargreaves Lansdown plc is also a Non-Executive Director of Tesco plc.

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