Derren Nathan, head of equity research, Hargreaves Lansdown: “The FTSE has opened down this morning. Central bank policy and commentary could provide some direction later on, with rate decisions due from both the Bank of England (BoE) and European Central Bank (ECB). There are no changes expected to be announced in either London or Frankfurt. The ECB’s followed a steeper easing slope with rates now stable at 2.0% since June last year. With yesterday’s Eurozone inflation figure of 1.7% coming in way below target, there may be some growing calls for a further drop in borrowing rates. That could go some way towards halting the Euro’s ascendancy against the dollar, providing some much-needed relief for exporters.
Recent BoE votes have been far more tense than the relative unity seen by European rate setters. Once again, today’s vote split will provide vital clues around the likely direction of travel. A surprise uptick in December’s inflation to 3.4% was a timely reminder of the tightrope being walked by UK policymakers. With unemployment of 5.1% at the highest level since April 2021, both equity investors and job seekers will be hoping for more than just one quarter-point cut this year. But with inflation not yet slain, that’s far from a done deal.
Shell’s underlying earnings dipped from $5.4bn in the third quarter to $3.3bn in the final stretch of 2025, reflecting softer macro-conditions for the sector. That fell short of market forecasts of $3.5bn. Net debt also went in the wrong direction, ending the year at $45.7bn, but at 20.7% gearing, the balance sheet remains strong compared to peers. Shell’s taking a long-term view, keeping its foot on the buy-back pedal with a further $3.5bn program, and investing in key projects such as the stage 3 Gorgon gas project in Australia. However, if the uplift in debt proves to be more of a trend than a blip, the sustainability of shareholder returns at this level could come into question.
US stock futures suggest little movement when Wall Street re-opens. Chip stocks were broadly down yesterday after AMD’s guidance underwhelmed. Speculators also upped the pressure on software companies, with S3 Partners LLC estimating $24bn of gains for short-sellers in recent days. The prospect of AI tools allowing enterprises to effortlessly build their own bespoke analytical tools will be weighing on developers’ minds. But it’s still a huge leap of faith to back away from tried-and-tested providers of business-critical applications. Just like last year’s Deep Seek moment, this is unlikely to be a storm that sinks all ships. Big losers this week include Thomson Reuters, Microsoft, Salesforce, Adobe and Gartner. For those willing to sift through the wreckage there are likely some bargains to be had.
Alphabet is one name that’s been more than holding its head above water this year. But a blowout on cloud growth wasn’t enough to lift the shares in after-hours trading as operating profits fell slightly short of the mark. The YouTube and Google parent is not afraid to splash the cash and has come out with a stellar $175bn-$185bn capex guide for this year. An eyewatering number but one that has the potential to cement Alphabet as one of the outright winners in the AI landgrab, if execution remains on point.
Brent Crude is down 2% to around $68 a barrel. Prices continue to track the volatile political mood between Washington and Tehran, with the latest confirmation by Iranian officials of talks in Oman tomorrow, helping to ease risk premiums for now. Over-supply concerns, dollar strength and forecasts of relief from the polar vortex that’s engulfed much of the eastern seaboard could see further near-term pressure on prices.
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