Oil prices continued a slow creep towards the $100 per barrel mark on Tuesday.
Brent crude is at a six-week high, with apparent moves toward a deal between Iran and Oman to manage the flow of some shipping through the Strait of Hormuz merely underlining Tehran’s control of the waterway.
For now, government bond yields remained steady and that applied to stocks too.
Investors will have a laser focus on US inflation data out later this week to see if the impact of rising energy prices is starting to feed into broader inflationary pressures.
Record copper prices add to a picture which is becoming as complicated for investors as an M.C. Escher work, as the threat of US tariffs on refined copper adds to declining production and rampant demand linked to AI, power grids and electric vehicles.
In London, miners and oil and gas companies were in demand with investors while banks and housebuilders were among those dragging on UK stocks’ performance.
Computacenter
Once seen as a mundane business at the boring end of tech, which if anything would be a victim of AI disruption, Computacenter continues to convince people it is a lasting beneficiary of the artificial intelligence push. Computacenter has delivered its best-ever set of first-half results, lifting the dividend by double digits and raising guidance.
The reseller of IT hardware and services provider is seeing surging demand linked to the rollout of AI infrastructure, with North America becoming the engine of growth for the business. The UK arm, while not running at quite the same speed, is showing some signs of recovery.
Computacenter is not only buying and sourcing kit for the big AI players but is also helping to design, build and maintain the necessary infrastructure as a cherry on top. That makes it a rare UK-listed beneficiary of the ongoing AI arms race.
A record order book points to ongoing strong demand, but whether this is sustainable is open to question. Computacenter has sought to augment its position through the acquisitions of AgreeYa and Government Acquisitions Inc in the first half of the year, which have given it a foot in the door for US federal government contracts.
Having recently ascended to the ranks of the FTSE 100 after more than doubling in value over the last 12 months, Computacenter’s ability to eke out further share price gains speaks to the quality of the latest results.
Dunelm
Dunelm looks to have fallen foul of the wrong kind of weather as the sun was shining too bright over the summer to entice people into its stores. Retailers constantly look for a Goldilocks scenario for their seasons – just the right temperature to get people out of the house and shopping, but not too hot or cold to put them off.
The kind of heatwave we’ve just seen in the UK was clearly too much for some people, keeping them in the cool of their home rather than sweating it out in retail parks or the high street.
A warning about weaker trading in July and August has knocked Dunelm’s shares for six, sending them down 10% as analysts sharpen their knives to cut profit expectations. It’s not the ideal scenario to launch a new three-year growth plan.
Dunelm wants customers to spend greater amounts and keep coming back for more. It is prepared to invest in the business, and it wants to keep the balance sheet looking healthy. That’s a sensible blueprint and is more akin to something all retailers should have imprinted in their DNA rather than adopting as a radical idea to reinvent the wheel.
There is the usual talk of wanting to find new cost savings, making sure it offers something for everyone, and wanting to do things faster. Again, these make perfect sense. This is a growth plan that has common sense at the core. The proof will be in the pudding as Dunelm needs to prove to the market it isn’t just another value-led retailer chasing quantity over quality of sales.
It will clearly have to spend money to make money, with plans to upgrade existing stores and open new ones. While that has the potential to generate benefits down the line, investors are increasingly short-term in focus and might simply see these efforts as gobbling up cash that might have otherwise been used for greater share buybacks and/or dividends.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
