- FTSE 100 slips around 20 points at the open
- US non-farm payrolls today, expected addition of 169,000 jobs
- Amazon guides for $100bn capex in AI spree
- Legal & General pivots towards US Bulk Annuities
- Brent crude back below $75 per barrel
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The widely-expected UK rate cut hasn’t been enough to help propel the FTSE 100 beyond yesterday’s record close, as investors take on board the Bank of England’s hammer blow to its forecast for UK economic growth, amid worries about stagflation taking hold. GDP is now expected to grow just 0.75% in 2025. The pound weakened further against the US dollar as governor Andrew Bailey hinted at further rate cuts to come. US non-farm pay rolls later today, expected to have added 169,000 jobs last month will provide a temperature check on the US economy. In stark contrast to the UK, the US Chamber of Commerce expects GDP to rise over 3% this year.
But not all FTSE companies should be tarnished with the same brush. There’s plenty of international exposure in the Index. Financial services provider Legal & General has sharpened its US facing strategy today divesting its protection business to long-standing partner Meji Yasuda, with whom it has also agreed a partnership to target the lucrative US Pension Risk Transfer market. Meji Yasuda intends to take a 5% stake in the company. Investors liked the vote of confidence with the shares rising in early trading.
Brent Crude’s back below $75 as prices head for a third consecutive week of declines in the wake of fresh calls by President Trump to boost production. Whether that sparks more drilling action in the shale basins remains to be seen. There are already some signs of oversupply with US inventory building faster than forecast earlier in the week. Sanctions on Iran could provide some support for prices, but China’s levy on US energy imports are unlikely to be a huge bargaining chip in the fast-unfolding trade war given modest import levels compared to purchases from Russia and Saudi Arabia.
Amazon has become the latest tech giant to confirm its commitment to huge infrastructure investment, pledging to dole out $100bn this year, in an effort to capture a ‘once in a lifetime opportunity’ offered by generative artificial intelligence. My colleague Matt Britzman’s insight on their fourth quarter earnings is below.”
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Management brought a confident tone to last night’s analyst call, but it wasn’t enough to stop the bleeding, with shares still down about 4% in after-hours trading. The big takeaway was an aggressive capex guide for 2025 that echoes the open wallet sentiment we’ve seen from other mega-cap players. In a similar fashion to what we heard from Microsoft, Amazon said they’ve left some cloud growth on the table as they couldn’t quite ramp up new capacity as quickly as they’d like. If you want to be picky, that raises a small question mark around AWS revenue growth in the coming quarter and whether they can bring on new capacity fast enough – but for longer-term investors, these are very positive signs that the AI trade is in full flow.
Retail business performance was a standout, though often overlooked these days. It’s an area that’s been steadily improving ever since Amazon launched a major cost-cutting effort, and the benefits are feeding down to the bottom line. Margins for the all-important North American segment improved once again with record-breaking Black Friday Week and Cyber Monday sales proving that US consumers are still ready to splash the cash when the deals are right. The positive news from the call was talk of more low hanging fruit to go after on the cost side, which should support margins into the new year.”
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