Susannah Streeter, Chief Investment Strategist, Wealth Club: ‘’London's FTSE 100 has scaled fresh heights as its defensive qualities shine once again in an uncertain world. Investors are grappling with the fallout from a tech sell-off and are assessing deteriorating relations between the US and Iran. The Footsie hit fresh record levels in early trade, as investors sought solace in its constituents with mining, utilities and energy stocks making gains.
After a US fighter jet shot down a drone in the Arabian Sea, it’s creating nervousness about the eventual outcome as tensions remain high between Washington and Iran. Oil prices have shifted higher as supply concerns are back in focus in the Middle East, with the benchmark Brent Crude, trading around $67 a barrel. This is giving support to energy giants on the FTSE 100 in early trade. The military action has prompted another move back into safe havens, with gold and silver adding to their recovery rally. Gold is comfortably back above $5,000 an ounce, while silver is 6% higher, trading around $90.4 an ounce.
Speciality insurer Beazley is leading the FTSE 100 pack after terms were agreed for an £8 billion takeover by insurance giant Zurich. It shows how UK companies hold allure, given they are still considered to be undervalued compared to overseas peers. The exit of another big name from the blue-chip index will be a blow to the City. With global whales swallowing big fish in the UK pond, it limits available listed assets for funds. This is partly why private markets opportunities are increasingly attractive, given the opportunities to invest in listed companies are declining.
The ending of the four-day partial government shutdown in the US looks set to provide a little more optimism Stateside, with the S&P 500 on track for a small gain, but volatility is set to stay the trend. A raft of highly disappointing tech results and guidance has unnerved investors who are already jittery about the overall impact of artificial intelligence advances. Companies are increasingly hesitant about making decisions in a highly uncertain landscape being disrupted by AI. Research and advisory firm Gartner saw its shares slide by a fifth as its more downbeat outlook worried investors. Stasis is spreading among its customers who are putting off inking deals due to the shifting landscape. This uncertainty is tarnishing big tech giants too, with Nvidia, Microsoft and Oracle also lower. PayPal's shock miss of its earnings predictions and a surprise change of CEO saw the stock slide 20%. It’s clearly struggling to compete in a highly competitive payments market, despite trying to leverage AI to enhance its services.
More widely the software sell-off has gathered steam as investors fear the AI juggernaut will cut deeply into earnings as agents take over workflows and replace more traditional programmes. Adobe, ServiceNow and Salesforce experienced fresh declines. The tech industry is in a state of high stakes flux, and as weakness pervades the software sector, it’s likely to spark a round of mergers and acquisitions.’’
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