- Caution the name of the game as Trump threatens Europe with tariffs.
- FTSE 100 opens lower amid investor wariness.
- The bears prowl the crypto market amid risk-off sentiment.
- Crude prices hover at multi-month lows, as supply issues ease amid Ukraine deal hopes.
- Rolls Royce fires on all cylinders with shares lifting 7%.
- Aviva shows va va voom, with annual earnings beating expectations.
- Nvidia releases robust results but still manages to disappoint investors.
- Salesforce sluggish outlook dents hopes for a quick return from AI.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’As concerns swirls about the latest tariff threats emanating from the White House, this time in the direction of the EU, there’s set to be a subdued start to trading as investors mull the repercussions. The FTSE 100 has opened lower, as caution remains the name of the game amid a murky outlook for the global economy.
Speculators betting on a sharp recovery for Bitcoin have been left sorely disappointed as the crypto market continues to be battered by a wave of negative sentiment. The bears have been prowling around the crypto market with crypto dropping 20% from its recent peak. Although it has made up a little ground in the last few hours, the rate of descent has been so rapid there’s a long way to climb. Donald Trump’s aggressive trade approach has sparked concerns with investors hurtling away from riskier assets and the huge hack of the Bybit exchange in Dubai has also rattled sentiment. Without any firm moves from Trump to show his support for the crypto sector, nervousness looks set to continue.
Oil prices are trading near levels last seen in December, with Brent Crude hovering under $73 a barrel. Supply issues are easing off but traders are assessing the more downbeat outlook for the world economy, given US tariff threats. Expectations have risen about a potential end to the war in Ukraine which could see sanctions on Russian oil exports lifted. It comes after Kyiv and Washington appear to have finalised an agreement on the US clinching a share of the country’s mineral wealth. The deal looks set to see a fund established, to pay for Ukraine’s reconstruction, which would be jointly managed by the US administration.
The spotlight will be on Keir Starmer’s high-wire diplomatic balancing act on Washington today. The UK Prime Minister faces the supremely tricky task of trying to keep the US onside as a key NATO ally but demonstrate a stern enough demeanour to maintain support at home. He has a slightly stronger hand now, given the commitment to up military spending to 2.5% of GDP, with a pledge to raise to 3% during the next parliament but he may still be scolded for a lack of ambition. Given the fracturing of Western relations over the past week, amid Trump’s siding with Putin, maintaining military partnership will be the most urgent topic of discussion. While talk is likely to turn to trade, given Trump’s tariff threats still dangling over the world, making progress on an agreement for a UK exemption or even a future deal, is likely to be wishful thinking.
It’s a jam-packed results day with Rolls Royce gleaming as a bright spot, with shares up around 7% in early trade as it restored the dividend and upgraded mid-term guidance. The aerospace giant is firing on all cylinders and sights are set on new medium-term ambitions of £3.6 billion-£3.9 billion of underlying operating profit. More from my colleague Aarin Chekrie below:
There’s more va va voom from Aviva after it posted a 20% rise in annual operating profit, which hit £1.77 billion, beating forecasts. General Insurance gross written premiums rose 14% to £12.2 billion. The challenges in parts of the UK and Ireland business are in the rear view mirror with growth in its insurance, wealth and retirement business exceeding expectations, with higher insurance premiums clearly feeding through. The Direct Line acquisition is on track and should offer further momentum given it should bolster the company’s leading position in the UK motor and home insurance market. CEO Amanda Blanc has big ambitions to go after untapped potential elsewhere in the market. She has demonstrated prowess in getting the business in shape but now she’s got to seize on the momentum to exploit those fresh opportunities.
Wall Street is set to open with a touch more positivity, but sentiment has been wary despite even though the highly anticipated quarterly results from chip giant Nvidia signalled strong demand. The bar was set high again and Nvidia vaulted over with numbers beating forecasts, but given how much investors have come to expect, there’s a touch of disappointment hanging around. The outlook from Salesforce was sluggish, with hopes that its new AI tools would already be leading to faster sales growth fizzling out. Without clear evidence that big AI spend it justified, concerns are swirling that it might curtail AI adoption. With more insight on Nvidia and Salesforce from my colleagues Derren Nathan and Matt Britzman.
Derren Nathan, head of equity research, Hargreaves Lansdown:
“Nvidia has swept aside concerns about production of its Blackwell chips, and threats to the boom in demand for computing power with top and bottom-line beats for the fourth quarter, and guidance for the current quarter ahead of expectations. The shares were up strongly today in anticipation of a good out turn so perhaps little surprise that slightly softer than expected gross margin guidance has kept a lid on a further big uplift in after-hours trading.
On the plus side, that may mean that NVIDIA is overcoming supply constraints to meet the ‘amazing’ demand for Blackwell as AI models pivot from training to reasoning. The longer-term investment case for the driver of the AI train is looking difficult to pick holes in, with Meta’s $200bn just one of the latest mega investments in data centres to be unveiled recently. By virtue of scale, growth may be slowing a little but upgrades to analysts full-year numbers can be expected off the back of today’s results. At a around 30x forward earnings the valuation still doesn’t look overcooked.
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Salesforce is saying all the right things when it comes to AI agents, confidently touting their Agentforce strategy with juicy anecdotes, but the stock still slumped 5% after hours as top-line growth failed to spark. Despite hitting underlying operating income targets, revenue growth chugged along at a modest 8% year-over-year – missing expectations by a hair – and guidance for the next quarter and full year came in lighter than hoped. The 3,000 paid Agentforce deals might still be in the “let’s dip our toes” phase for most of its 150,000 customers. Still, the margin story shines brighter, with efficiency gains from agents powering internal operations, setting the stage for a compelling long-term bet on a $4 trillion automation opportunity that Salesforce is primed to seize – when AI Agent adoption finally catches fire, that is.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Rolls-Royce continues to soar above expectations, after delivering another set of high-flying results. The group’s turnaround has been so impressive that some of its 2027 guidance has been hit two years early, causing the group to upgrade its mid-term guidance.
Revenues are being boosted by the upward trend in engine-flying hours, which are now cruising above pre-pandemic levels. But that’s just one part of the puzzle. Layoffs, contract renegotiations, process changes, and increased use of data to drive efficiencies have put Rolls on a much healthier platform. As a result, margins have moved much higher, helping to convert the increased flying hours and revenue into profits.
Rolls-Royce also has exposure to the defence sector, with around 25% of revenue coming from this area. Earlier in the week, Keir Starmer stated that UK defence spending is set to rise from 2.3% to 2.5% of GDP by 2027. With positions in combat aircraft and nuclear submarines, Rolls-Royce looks well-paced to capture some of the increased defence spending.
The much-improved financial position has also given Rolls-Royce the wiggle room to put more cash back in shareholders’ pockets by reinstating dividends and announcing a £1bn share buyback programme. The latter represents around 2% of the company’s market value, which should be a modest tailwind to the share price. With more improvements expected beyond the upgraded mid-term guidance, there are plenty of reasons for investors to remain positive about Rolls Royce’s future.”
