- FTSE 100 edges higher at the open.
- UK’s BoE expected to hold rates steady at 4%.
- US Fed cuts and signals more to come, but uncertainty is high.
- Busy week for chip giant Nvidia.
- Oil dips as investors digest mixed signals.
- Next continues to showcase its strengths.
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“The FTSE 100 edged higher at the open after breaking a three-day losing streak yesterday, with the Bank of England’s rate decision firmly in focus. Corporate updates continue to flag weak domestic momentum, with Next the latest to warn of anaemic growth and heightened uncertainty ahead of the Budget.
The Bank of England is widely expected to hold rates at 4% today, with markets pricing a 97% chance of no change. August’s narrow 5-4 vote to cut has likely shifted to a stronger hold majority as sticky services inflation and rising food prices keep policymakers cautious. With UK inflation at 3.8% and likely to tick higher before easing next year, the path to further cuts looks slow.
The Fed’s 25bp cut landed as expected, but the dot plot stole the show – pointing to another 50bp of easing this year, even as policymakers remain miles apart on the path forward. Inflation is still sticky, jobs are cooling, and the committee now faces a delicate balancing act as its two mandates (jobs and inflation) pull in opposite directions. The S&P 500 closed flat, but futures are flashing green this morning as investors bet that, for now, rate cuts are a tailwind worth chasing.
It’s been a busy news cycle for chip giant Nvidia. CEO Jensen Huang’s presence at US-UK trade talks underscores Nvidia’s role in a multibillion-pound push to build AI infrastructure – another sign that sovereign AI demand is becoming a structural growth driver. At the same time, China remains an ongoing headwind, with regulators launching an anti-monopoly probe and new restrictions effectively shutting the door on RTX chip sales, raising doubts about any near-term recovery there. Still, the company expects Q3 revenue to climb around 55% from last year, a remarkable feat for a business that’s lost one of its biggest markets.
Oil moved lower in early trading, extending yesterday’s losses as traders digested a mixed bag of signals. US inventories plunged by 9.3 million barrels, but distillate stocks hit their highest since January, tempering the bullish tone. Add in a Fed rate cut that hints at softer economic momentum, and it’s no surprise the market feels a little uneasy despite steady global demand.”
The author holds shares in Nvidia.
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Next breezed past its original sales guidance over the first half, driven by favourable weather, major disruption at M&S and impressive international growth. In the UK, both online and in-store full-price sales grew at mid-to-high single digits. There are reasons to be cautious about the outlook for the UK economy over the medium to long term though. While Next isn’t expecting it to drop off a cliff edge, it does expect anaemic growth at best. The fashion powerhouse is clearly unimpressed by the current government’s performance, which has brought about declining job opportunities, unfavourable regulation, unsustainable government spending, and rising taxes that make it harder for the economy to grow.
Despite these challenges, Next is in a strong position to continue dominating the UK market. Strong demand in its online channel remains a running theme, and it’s likely to remain the main growth driver. It already makes up more than half of group sales, and with international expansion still in its early days, growth abroad is powering ahead — up an impressive 28%. Around 90% of its overseas business comes from Europe and the Middle East, both of which can be serviced quickly and cheaply from the UK. Given the untapped size of these markets, there’s a big opportunity if Next can execute its expansion plans well, providing the potential for upside to current full-year guidance.”
