Daily market update: FTSE 100, gold miners, Lloyds, Anglo American, Tesla

After a miserable day on Wall Street yesterday, European markets opened with a spring in their step,” says Russ Mould, investment director at AJ Bell.

The FTSE 100 was propelled by Lloyds enjoying a relief rally amid relatively positive news on the motor finance scandal, while Endeavour Mining continued to shine off the back of gold surpassing $4,000 an ounce for the first time.

While stock markets have generally done well this year, gold has been a superstar. Traditionally, investors would load up on the shiny stuff when markets look gloomy, not when they’re motoring ahead. It shows that investors are hedging their bets, particularly as there are growing concerns that euphoria around AI has gone too far and the bubble could burst at some point.

Lloyds / Motor Finance

The motor finance scandal is proving to be less dramatic than thought. Lloyds’ shares jumped after the regulator proposed that motorists would get £700 on average in compensation, lower than the previous indicated amount of £950.

Lloyds has already taken a £1.2 billion provision to cover the cost, which now looks like a reasonable assumption. The fact its share price jumped means the market is comfortable with the outcome and that a big uncertainty factor will soon be removed.

Lloyds’ management will be keen to shift the market’s focus to the bank’s growth opportunities in the future, not what it has done in the past.

Anglo American

It’s never a good look when a takeover target comes out with bad news just after receiving a bid. In Teck’s case, the downgrade to copper production guidance isn’t severe enough to derail its tie-up with Anglo American.

Anglo implies it was already aware of operational challenges at one of Teck’s projects following due diligence on the company. While Anglo wasn’t privy to the downgraded guidance now announced following Teck’s operational review, it has implied to the market that the news isn’t a complete shock.

The fact it says the strategic reasons behind the merger with Teck and associated synergies remain unchanged was enough to reassure investors, sending its shares higher.

Tesla

What’s affordable in the eyes of a billionaire is not the same as the everyday worker. Tesla’s shares took a hit yesterday after its much-hyped product launch turned out to be a lemon.

Elon Musk’s idea of price cuts was wildly off the mark. New versions of its Model Y and Model 3 have been priced a mere $5,000 below previous models. The market had been hoping for something much more affordable so Tesla vehicles could not only appeal to a bigger pool of potential customers but also be more competitively priced against rivals.

Elon Musk faces a big predicament: price low to sell as many vehicles as possible or keep prices high enough to avoid a big dent to margins. It appears he’s going down the latter path, which could be a rocky road if more rivals overtake Tesla.