Mourn on the fourth of July? Torn on the fourth of July? Forlorn (hope) on the fourth of July? Worn (out) by the fourth of July? We don’t have long before the UK election but there is lots of fun to be had. Get ready for an overdose of political analysis on which seats are going to be important and whether it’s going to be too close to call. Safe to say that for now, the market is not overly worried. Cable has pulled back a touch from a two-month high struck yesterday, shares are not budging and gilts are more worried about inflation than what Keir Starmer and Rachel Reeves might have in store for them. But traders will be tooling up for the next six weeks – some heavy central bank activity between now and the election also makes for some interesting times.
Higher UK inflation and some slightly hawkish noises from central banks has pushed risk down a bit yesterday and this morning, things are a little mixed. The FTSE 100 is down around 0.25 per cent but mainland bourses are trending higher by around the same amount. In London, utilities are taking a beating as National Grid announced a £7bn capital raise to help fund investment. Shares in the company fell 9 per cent with Severn Trent and United Utilities both down 5 per cent in sympathy. More on all that here
Miners also scrubbed a few points off the index as metal prices retreated. Meanwhile Hargreaves Lansdown shares soared after it rejected a private equity bid – yes we have seen the FTSE 100 hit record highs but UK stocks, the mid-caps in particular, are still offering tremendous value – cue more soul-searching about how undervalued UK stocks are still despite the recent improvement. An election could make a difference to valuations – once the dust settles and we get clarity on policy.
Metals have sharply retreated after a frenzied ramp in prices – gold pulled back further from the record as yields firmed along with the USD, while copper cratered as China buyers balked at the high prices. Silver fell for a second day to near the $30 mark. Money markets are also scaling back European Central Bank rate cut expectations for this year, though a June cut seems a certainty given the talk from president Christine Lagarde and co.
Yesterday, the Dow shed about half a percent while the S&P 500 was off by 0.25 per cent. However, futures indicate the S&P will open up higher as Nvidia shares delivered the kind of shot in the arm this slightly flagging bull market needs. Revenues were up 262 per cent versus 242 per cent expected, net income up to almost $15bn, strong demand for the new Blackwell chips. “We will see a lot of Blackwell revenue this year,” said CEO Jensen Huang. Worries about ‘air pockets’ in demand were dismissed. It was the kind of health beat the market wanted. Shares rallied 7 per cent after-hours to a new record. Scottish Mortgage rallied 2 per cent this morning with NVDA the largest holding at 8 per cent of the investment trust. More on all that here
The Trader is written by Neil Wilson, chief market analyst at Finalto
