Market Report: FTSE an island of calm in volatile markets
Derren Nathan, head of equity research Hargreaves Lansdown: “The FTSE’s on a stable footing today rising slightly at the open to lock in yesterday’s modest gains despite Rachel Reeves revealing in yesterday’s Spring Statement that the Office for Budget Responsibility (OBR) has halved its 2025 growth forecast for the UK economy to 1%. Given the sluggish start to the year this was no great surprise, and investors have preferred to focus on upgrades to the outlook for the following three years.
The screens are reading more bleakly for equity markets elsewhere. All the major US indices ended down yesterday with the tech-heavy NASDAQ feeling the worst of it as both Nvidia and Tesla slid more than 5%. NASDAQ futures point to more weakness later today. Nvidia’s fall came as reports emerged of Chinese regulators excluding Nvidia’s H20 chip from a list of environmentally friendly microchips for data centres. Nvidia’s right up there when it comes to power efficiency and has navigated export restrictions to China with aplomb. China’s also a smaller part of the revenue mix than it was so there’s reason to hope that the current share price weakness will prove to be a blip rather than a trend.
The cooling in Tesla shares follows a sharp recovery early in the week, which has been stopped in its tracks by Donald Trump’s decision to slap a 25% tariff on overseas cars with immediate effect. That’s had a ripple effect dragging down Japan’s Nikkei, South Korea’s KOSPI and the Euro STOXX 600.
So far, traders are fairly circumspect around any likely impact of auto-tariffs on oil demand, as Brent Crude prices remain close to four-week highs of around $73.6 per barrel. While the assault on free-trade may impact automobile production wide-spread tariffs and sanctions also look likely to impact trade-flows of oil & gas, with India’s Reliance Industries, operator of the world’s largest refining complex, already planning to halt Venezuelan oil imports following earlier tariff announcements.
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “Next continues to deliver for investors, with yet another profit upgrade continuing its hot streak. In 2024, online sales remained the driving force behind performance, helping to offset small declines in retail stores which have come under a bit of pressure given the structural decline of the high street. Overseas sales continue to grow at an eye-watering pace, up at double-digit rates. Given the untapped size of foreign markets, there’s a big opportunity ahead if Next can execute its expansion plans well.
Positive momentum has spilt into the new financial year, with sales over the first eight weeks coming in well ahead of expectations. That’s given management the confidence to upgrade full-year profit guidance yet again, expecting pre-tax profits to rise around 5.4%. There were some notes of caution though. Sales in the second half of last year were strong, making for a tough comparable period ahead. Tax rises in April are also expected to weaken the UK employment market and dampen consumer confidence as the year progresses. Regardless, cash generation is healthy and if overseas expansion continues, there could be a long runway of growth ahead.”