Susannah Streeter, Chief Investment Strategist, Wealth Club: ''It’s been a volatile ride for commodities, with prices of metals and crude dropping back from their record highs. The FTSE 100 is set for a flat start in early trade, as shares in miners and energy giants come under more pressure, amid uncertainty about the geopolitical and economic backdrop.
Tense international relations and capricious US policymaking collided with concerns about structural undersupply in the market led to sharp rallies then sell offs as investors booked profits and re-assessed the outlook. Oil prices have also retreated, after hitting multi-month highs. While the American military build-up in the Gulf has continued, and threats continue to bounce between the US and Iran, the lack of immediate action so far has had a small cooling effect on prices.
Sentiment in the US is still being driven by the twin engines of speculation about the AI boom and the direction of interest rates. Amid concerns about the US administration interfering in decision-making at the Fed, rumours are swirling about who will be the next chair and if they’ll bow to the President’s commands. Kevin Warsh is believed to be Trump’s anointed successor at the Fed, with a decision expected to be announced later. He’s a former Fed governor, and while he did have a reputation as being an advocate of tighter monetary policy, earning the ‘hawk’ moniker, he’s recently been publicly advocating for a fresh cut in interest rates, aligned with Trump’s thinking. However, his experience and past attitude imply he’s likely to hold the line if sharp inflationary pressures return.
While a raft of tech results show plenty of companies are still getting bang for their buck as AI investment pours into the industry, there are signs of fragility ahead. Microsoft’s weakening cloud revenue growth was a red flag, unnerving investors. Apple has been behind the curve on its AI spending spree, yet the features installed in the iPhones so far were still enough of a draw to help bring in record revenues for handset sales around the world. Apple hasn’t thrown the kitchen sink at AI opportunities but taken a softly-softly approach which seems to be more in tune with many consumer and company attitudes so far. But as rapid advancements evolve elsewhere, Apple does not want to be left behind, which is why it's collecting partners to help it deliver AI services, like Google and OpenAI and its latest acquisition - Q.AI. This is a move which is likely to see machine learning integrated further into Apple’s wearable devices.’’
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