Daily market update: BHP, Intel, Palo Alto Networks

“The FTSE 100 dipped a little in early trading after selling on Wall Street and in Asia overnight,” says AJ Bell head of financial analysis Danni Hewson.

“Markets seem to be exercising some caution ahead of the Jackson Hole meeting later this week and as talks over a peace agreement between Russia and Ukraine remain inconclusive.

“Earnings from Home Depot later today will be closely monitored as investors look for any indication of how the US consumer is faring.”

BHP

“A lift in the dividend payout ratio from BHP does seem to have gone some way to salving any concern among investors about a drop in earnings. 

“The dividend itself was actually lower thanks to the lower earnings but the decision to dole out a greater proportion of these earnings is instructive.

“It shows the business is feeling reasonably confident about the outlook despite the short-term hit it has taken from exposure to weaker iron ore prices. It also reflects a strong cash flow performance which meant borrowings were lower than anticipated.

“The company’s decision to flex its debt limits suggests it is either gearing up for M&A, investment in its existing roster of projects or potentially enhanced returns to shareholders.

“The company continues to signal its attention to focus on so-called ‘future-facing commodities’ such as copper and potash. Whether it can achieve this organically or whether it will require a major deal to really kickstart this process will likely become clear over time.” 

Intel

“It has been a hectic time for shareholders in Intel. In the space of a week or so, they have seen President Trump call for their CEO’s departure before reportedly agreeing to take a stake in the business and now Japanese conglomerate Softbank buying shares in the chipmaker.

“The divergent reactions to this news – with Intel gaining further ground and Softbank falling overnight – shows who the market thinks has got the better end of the deal.

“Investors will be watching closely for any indication of whether this flurry of activity will help or hinder recently appointed CEO Lip-Bu Tan’s efforts to revive what is a big sleeping giant in the US tech space.

“Intel has been left behind by the shift to AI with US peers like Nvidia and Advanced Micro Devices enjoying much greater success in this market. This is suboptimal at a time when traditional sources of demand for chips like smartphones and personal computers have tailed off.

“The company’s position as the last US manufacturer of high-end semiconductors of any scale means it has potential strategic significance across the Atlantic but translating this into improved operational and financial performance is now the big challenge.

“Softbank’s investment does at least provide one vote of confidence that Tan’s recovery effort can be successful.”

Palo Alto Networks

“In all the excitement around AI the growth potential of the cybersecurity industry can sometimes be forgotten. However, as more and more households and businesses conduct their affairs online, keeping data safe from cyber criminals is increasingly relevant. 

“That’s reflected in the latest earnings from Palo Alto Networks which unsurprisingly got a positive after-hours reception as the company not only beat expectations but, more importantly, raised forward guidance.

“These positive headlines probably helped ease any concern about the retirement of founder and chief technology officer Nir Zuk. 

“The company’s medium-term prospects will be determined by its ability to make a success out of the prospective $25 billion acquisition of Israeli identity security specialist CyberArk. The initial market reaction to the largest deal in the group’s history was not positive and CEO Nikesh Arora faces a challenge to win investors over to the merits of the transaction.”