Derren Nathan, head of equity research, Hargreaves Lansdown: “There’s an air of calm around London markets this morning. The FTSE 100 has posted a gain while ignoring cues from Asian indices, which saw widespread losses overnight despite better-than-expected data for industrial output and retail sales in China. But with Asian economies acutely reliant on oil imports, rising energy prices continue to dominate, with Brent Crude continuing its ascent to around $104 per barrel. So far, there’s been no commitment by the international community in response to Donald Trump’s appeal for a naval coalition to secure the Strait of Hormuz. However, the UK’s leading index is partially hedged due to its exposure to oil & gas producers and the defence industry. The heavy weighting from pharmaceutical companies provides a further defensive layer, and recent earnings from banks and financials, another key contributor to the index paint a picture of resilience.
Later in the week, central bank decisions will become a key focus for investors. The UK, US, Japan and Eurozone are all expected to leave rates on hold, with Australia being the notable exception, as strong consumer spending and inflation well above target are expected to see rate setters try to take a little steam out of the economy. Over the course of 2026, we expect further cuts by both the Bank of England and the Federal Reserve, but no reductions from the European Central Bank until at least next year. On the other hand, we’re expecting the Bank of Japan to raise rates, with the current interest rates well below the rate of inflation. However, if the current spike in oil prices persists, we may need to revise these views as policy makers grapple with the conflicting inflationary pressure and brakes on economic growth that come with higher energy costs.
Overall, however the war has seen yield curves steepen, which has taken the wind out of gold investors’ sails, and the precious metal dipped below $5,000 per ounce over the weekend before recovering some ground. Keep in mind, it’s still 67% higher on a one-year view, so some profit-taking is to be expected. However, even if central banks don’t produce any surprises this week, all asset classes are likely to prove sensitive to guidance and commentary around the path for rates later in the year.
US stock futures are pointing to a positive start. Tech investors will be assessing the next developments in AI as NVIDIA kicks off its annual GPU Technology Conference (GTC). As well as NVIDIA’s rapid advances across the technology stack, there's also likely to be an increased focus on the revenue generation potential of AI for NVIDIA's customers as the tools build mainstream momentum.
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“All eyes at Nvidia’s Global Tech Conference will be on what Jensen Huang unveils, with investors hoping to see new chips designed for the next phase of the AI boom, potentially shaped by the company’s recent $20bn move to access Groq’s low-latency technology. Despite posting eye-watering financial results, Nvidia still trades on a relatively modest valuation, with some investors questioning whether it can remain dominant as AI demand shifts from training models to running them in the real world (inference). If Jensen can show Nvidia has the hardware to lead not just in building AI, but in powering its everyday use, this event could be a key moment in building confidence that Nvidia will remain the defining name in the next leg of the AI race.”
|
