- FTSE ticks higher off mixed wage data
- BHP sees lowest profit in six years
- Sovereign GPU demand on the rise
- US dollar rises as rates come back in focus
- Oil extends its gains on supply disruptions
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“UK markets are digesting the latest labour market data, with the FSTE 100 opening 0.15% higher. Yesterday was the defence stocks’ time to shine, with the sector’s heavy hitters soaring on expectations that the UK will ramp up defence spending to support Ukraine’s peace efforts. Today’s UK wage data came in mixed – December’s growth was slightly stronger than the economists had expected but fell short of the Bank of England’s forecast. There’ll be debate about whether this is a signal to worry about inflation again, but reading between the lines, this shouldn’t hinder the Bank of England’s plans for a gradual reduction in rates over 2025, with markets still anticipating a couple of cuts by year-end.
The global mining giants are in a tough spot, with the world’s largest miner, BHP, reporting its lowest first-half profit in six years. The good news for BHP investors is that geopolitical challenges and tariff wars have already been factored into forecasts, and results were a smidge better than feared. The outlook for 2025 is mixed, tariffs and weak global growth are likely to continue to weigh on demand, while ongoing rate cuts and hopes for more Chinese stimulus should offer some support.
News that the Korean government is in the market for 10,000 GPUs to fuel its AI ambitions should be seen as another proof point that Nvidia’s demand extends well beyond the giant US tech companies. We’ve now seen several countries express an appetite for building their own computing clusters, with the massive US Stargate project grabbing the most headlines. This is supportive to the Nvidia investment case and presents a relatively new and scalable demand avenue for its market leading chips.
The US dollar is on the rise as Fed officials hinted that interest rate cuts are on hold, focusing on tackling inflation instead. Governors Waller and Bowman urged patience, signalling no rush to cut rates unless inflation improves in 2025, while Philly Fed President Harker wants to keep rates steady. US markets were closed yesterday for Presidents Day, but futures markets suggest a positive open later today. Markets seem to have finally settled into the “no cuts in 2025” narrative, and as long as the talk doesn’t shift to further hikes, there’s now a foundation in place to support ongoing strength in the US markets.
Brent crude oil futures jumped to $75.4 per barrel as Ukrainian drones hit a key Russian pipeline, cutting off Kazakhstan’s oil flow and reducing shipments from giants like Chevron and Exxon. Traders are eyeing peace talks between US and Russian officials in Saudi Arabia, while OPEC+ plans to stick to its April supply increases, keeping markets on edge. Despite oil’s rise, trade war fears sparked by Trump’s tariffs are keeping a lid on any moves higher.“
