- FTSE 100 in the green in early trade at the end of a record-breaking week.
- Muted start for housebuilders as house prices barely move in January.
- Trump’s tariff threats hang over Canda, Mexico, and US importers.
- Gold prices glitter near record levels with trades on the HL platform in January higher than any other month last year.
- Apple shares rise more than 3% as it provides a crunch of reassurance about benefits of AI intelligence.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The FTSE 100 has set off on another sprint higher having already reached fresh records, as investors see renewed appeal in London stocks. It’s been a record-breaking week for the Footsie and enthusiasm is still high, with the index up 5% year to date. Given the volatility this week on Wall Street as investors fret about the trajectory of AI spend, and the impact of Trump’s tariff plans, there’s been a flight to safer havens, offering more reliable returns, where stocks have been undervalued compared to their US peers. The Dax in Frankfurt has hit record levels this week, despite Germany’s ongoing economic woes. But with the ECB reducing rates again by 0.25% and signalling there are more cuts to come, there is renewed appetite for listed multinationals this side of the pond. Investors are being drawn to their lower valuations, amid a raft of encouraging earnings. There are signs that US customers may be bringing forward bulk orders to avoid punishing tariffs down the road.
Housebuilders look set to come under some pressure, given the latest snapshot of the market from the biggest mortgage provider Nationwide. Prices grew at a slower rate than expected in January, climbing just 0.1% on the month. Even though the end to the stamp duty holiday is looming, it’s not given a huge impetus to the market. Affordability issues are still a real issue for many buyers, given how expensive mortgages still are. With a rate cut looming next week from the Bank of England, it may help to spark fresh desires to move house, although better deals from lenders are still expected to be slow to arrive.
President Trump is still dangling the threat of imposing tariffs on Canada and Mexico this weekend which continues to unnerve investors. Even though it’s still being seen as a negotiating ploy, its one that is close to the wire. These duties would be collected at the borders from US importers. While billions of dollars raised in tariffs might help put a dent in the US deficit, there’s a risk to American growth prospects ahead. Although the idea is that these firms would stop buying so many Canadian and Mexican goods and lead to a shift in supply chains. Trump wants to see US producers benefit instead or at least foreign manufacturers in countries without big goods trade surplus with America. But this is wishful thinking, especially in the short term, as such trade changes can take years, if they are possible. Instead, it’s likely that US importers will simply put the burden of extra costs onto their customers in the form of higher prices. This risks pushing up inflation again, an eventuality the Federal Reserve is well aware of, hence its more cautious stance this week when it comes to interest rate cuts. Higher-for-longer rates in the US risk weighing on economic growth, which has already edged down from 3.1% to 2.3%. But Trump may assess this is a price worth paying, to gain the fiscal headroom duties offer, to bring in his promised tax cuts.
Fears that inflation could spike again have powered up gold prices, with the precious metal still trading around new record levels. Gold is glittering as a safe haven asset and is proving a big draw to investors looking to diversify portfolios. The value of trades on the Hargreaves Lansdown platform in January have surpassed any month in 2024, including in October, when gold reached previous records. Volumes are also shaping up to be the higher than in any month last year. The volatile moves on US stock markets, caused by shock of rapid progress made by Chinese AI upstart DeepSeek, which threatens the dominance of Silicon Valley may also have helped added extra shine to gold this week.
With investors are highly tuned into how artificial intelligence spend will represent real revenue for big tech, Apple’s results have provided a crunch of reassurance. Apple is more immune to the fretting over AI competition from China, given how it’s approached the opportunities artificial intelligence presents. It hasn’t spent the big bucks on building infrastructure, unlike its big tech peers, and instead has concentrated in infiltrating its hardware, notably iPhones with AI features. There was an overall dip in iPhone sales during the crucial golden quarter because the Apple Intelligence system wasn’t available on phones in key markets. But in areas where they had been rolled out, sales were higher. With the features set to be integrated on the latest tranche of devices in Europe this Spring, it’s given investors hope that it will lead to a big wave of upgrades.However,
It remains to be seen just how enthused fans will be with the new features and whether there will be enough ‘wow factor’ to drive big sales, given such high expectations. The dollar strength is also starting to bite for Apple and the firm is still faces ongoing weakness in China.’’
