Susannah Streeter Chief Investment Strategist, Wealth Club: Nvidia might have been pushed out in the cold, but sentiment is starting to thaw as a broad tech rally takes hold. The chipmaker looks set to claw back a little more ground as investors lick their wounds following the Chinese spy scandal, while others buy back in amid the market rebound.
As bargain hunters went shopping for stocks, the S&P 500 surged, Japan’s Nikkei gained 2.7% and South Korea’s Kospi also jumped higher, as investors piled back into semiconductor names that had experienced the worst of the sell-off.
With no further indication of how far Democrats in Congress will go in trying to slow the AI juggernaut, a little more risk appetite has returned. But plenty of volatility is set to remain. The blue wave has also propelled politicians into office across multiple states, giving them the power to curb data centre development.
Energy prices continue to fall sharply, easing inflationary pressures and giving the tech sector an extra lift. A less severe interest rate environment also supports the value of future earnings.
London’s Footsie is on the front foot again in early trade. While it does not have quite the same spring in its step as other indices, it has been more immune to the tech sell-off. Like a tortoise, its progress has been slow but steady this year, without the drama of its hare-like peers. It looks set to head back towards record levels, helped by the more defensive nature of its constituents amid the tumultuous tech climate.
Anthropic is spying an opportunity to get its IPO over the line. However, the tech rout has come at a big cost for the company. Gone are the lofty ambitions of trying to float at a $2 trillion valuation. Anthropic is having to deal with the stark reality of a much more sceptical investor base.
The latest reports suggest some prospective investors are now discussing a valuation of around $1.1 trillion to $1.4 trillion, a substantial step down from the ambitions being talked about earlier in October. Despite the current rebound, it's a febrile environment. The FOMO wave has been replaced by a rip current of uncertainty, with investors less fearful of missing out than of being caught out if another brutal market sell-off returns.
There will still be appetite for the IPO, which could be the biggest since the SpaceX flotation, but Anthropic will not want it to be a flop. It will need to show investors on the roadshows this week that there is real value behind the hype, rather than expecting them to swallow another eye-watering AI valuation.
There are plenty of risks ahead, especially given the firm's stark warnings that AI could pose an existential threat to humanity. It is a much harder sell when an anti-AI mood is swirling and Democratic leaders are turning increasingly wary, showing determination to tighten regulation and limit the harmful impact of the technology.
Crude prices have headed even lower, back at levels not seen since the end of August, as officials double down on diplomatic efforts to find a resolution to the Middle East crisis. Democratic pressure is coming into play with expectations that they’ll be a fresh standoff over federal budgets if Trump doesn’t agree to end the war. While for now the US President appears to be making conciliatory noises, saying the war is military effectively over. However, words don’t quite tally with action with a fresh strike on facilities on Iran’s Qeshm Island reported. This is why energy prices still remain around a quarter higher compared to pre-conflict levels. However, optimism remains and this latest easing will start to filter through to the pumps and provide much needed relief just as higher energy bills are set to land as the winter approaches.’’
France has accused Iranian forces of being behind the cyber-attack targeting supermarket refrigeration systems. The curious breaches have been a stark reminder of just how easily food supplies can be disrupted. It seems consumers here have taken the warnings seriously about the need to stockpile seriously in the event of a future crisis. Grocery price inflation has edged up again, with supermarket prices 2.6% higher than a year ago according to data from Worldpanel. It's partly due to the jump in sales of essentials following the launch of the Government's Be Ready campaign. As shoppers have stocked up on long-life supplies, it’s been a boost for manufacturer Princes Group. The company which supplies goods like tuna, tinned tomato and pasta saw revenues lift by 7% over the first half and noted increased demand for ambient food products. If supplies are disrupted here it seems tuna pasta bake could be the meal of choice in a crisis.''
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