The FTSE 100 was modestly higher in early trading, though short of its recent all-time highs, as the latest developments in the Middle East drove an increase in oil prices.
Draft terms in an agreement over the Strait of Hormuz between Iran and Oman hinted at Tehran’s leverage in the region – with mooted bans for US and Israeli shipping likely to do little to calm tensions.
Brent crude was firmly above $80 per barrel to revive fears about inflationary pressures. As investors seek to get a steer on the trajectory of borrowing costs, all eyes will be on the latest US jobs report later.
A higher-than-expected number might prompt concerns about the economy overheating while a lower than anticipated reading could shift worries towards the potential for a downturn in the world’s largest economy.
Goodwin
Family-owned engineer Goodwin has largely kept a low profile in its time as a public company, even if a supercharged share price performance, and some recent volatility, has made it hard to ignore in recent years.
That may change after reports which reveal the Stoke-on-Trent outfit is entertaining bids for its defence business. The company is a major supplier to UK and US submarine programmes and has also benefited from bumper defence spending across other parts of its business.
The company took a big hit in March when it lost two significant contracts and faced order delays in the Middle East – casting a shadow over its dividend prospect.
Yet the interest in Goodwin’s defence arm is a reminder that the UK has a collection of engineering businesses which are global leaders in their respective niches.
What any sale would mean for the future of Goodwin as a standalone business remains an open question but it is likely to still derive a significant chunk of its revenue from military spending regardless.
Bytedance/Chinese AI
The competitive threat posed by China’s latest moves in artificial intelligence were brought into focus off the back of reports TikTok owner Bytedance is training an AI model that could rival Anthropic’s bleeding edge Mythos model.
China’s ability to compete in AI with the big US tech names is among the factors causing some jitters on Wall Street and Bytedance’s reported efforts follow the recent launch of models from Beijing start-up Moonshot and Alibaba.
The problem this creates for markets like the US is two-fold. It not only means hotter competition for the chatbots owned by the likes of OpenAI and Anthropic, but it means less demand for spending on microchips because the models can function on less computing power.
The emergence of the DeepSeek large language model from China at the beginning of last year caused perhaps the biggest jolt in the AI trade to date, but the latest developments reinforce the fact that the AI revolution is not just the preserve of the West.
Alphabet’s fresh $25 billion bond sale is just another reminder of the financial pressures for US firms involved in the AI arms race.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
