Daily market update: FTSE 100 steady, banks and retailers higher, Broadcom

Domestic pressure on Donald Trump to end the war with Iran and a reported ceasefire between Israel and Lebanon have swung the pendulum once again for markets.

Selling on Wall Street last night and in Asia earlier today gave way to a more positive mood as trading began in Europe on Thursday. 

Having pushed close to $100 per barrel yesterday, Brent crude has eased and gilt yields have also come off a little. Both remain elevated relative to the pre-war period which means inflationary pressures are still a factor to watch.

The playbook for markets is becoming wearingly familiar, with an improvement in sentiment around the Middle East situation helping to drive retailers, housebuilders and banks higher on the FTSE 100, while defensive names and energy firms take a step back.

Overall, the UK’s flagship index was steady in early trading but behind its European counterparts which have less exposure to the oil and gas sector. The FTSE 100 was also held back by several stocks trading without the rights to their latest dividends including Marks & Spencer, Vodafone and Sainsbury’s.”

Broadcom

If investors were looking for evidence of the AI theme being overheated, then the reaction to Broadcom’s latest numbers provides it in spades.

Pre-market trading puts the chip outfit on course for one of the biggest one-day sell-offs in terms of market value on record – albeit this is a list dominated by entries from the last few years when trillion-dollar-plus valuations have become more common.

Broadcom was trading at an all-time high at the start of a week which has also seen Anthropic file for an IPO and Alphabet unveil a record $85 billion fundraise.

Broadcom is being punished for revenue guidance which beat consensus expectations but came in short of the high end of analysts’ estimates, showing just how high the bar has been raised for the business.

The failure of Broadcom’s chief executive Hock Tan to lift the $100 billion AI chip revenue forecast for 2027 he gave in March also represented a failure to keep pace with runaway expectations.

In terms of the numbers reported, these were roughly in line with expectations – again, not what investors were hoping for from the stock.

Broadcom may have emerged as a key player in the booming AI infrastructure market, with a particular expertise in the custom chips increasingly being used by the likes of Alphabet and Meta. However, just like its rival Nvidia, Broadcom is finding that meeting and even slightly beating forecasts is not enough when the market is holding it to such a high standard.