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The FTSE 100 was off to a poor start on Wednesday, taking its cue from losses in the US overnight as Federal Reserve chair Jerome Powell painted a mixed picture on the outlook for interest rates, says AJ Bell Investment Director Russ Mould.
Powell’s measured take, as he seeks to balance risks posed by inflation and a stuttering labour market, was in direct contrast to his recently appointed Fed colleague Stephen Miran who made the case for more aggressive cuts 24 hours earlier.
Nvidia shares also came under pressure as antitrust concerns were aired about its recent tie-up with OpenAI. The chip designer’s massive weighting in the Nasdaq acted as a significant drag on the US index.
Asian markets shrugged off the weakness on Wall Street, as excitement bubbled up around the Chinese technology sector and fresh AI developments in the region.
Defence names were in demand in London after President Trump delivered combative messages to Russia on Ukraine.
Saga sailed higher as it returned to profit and trimmed its borrowings. The over-50s lifestyle group always seemed to have a solid proposition given it targets a growing demographic which often has a decent amount of spending power but has singularly failed to take advantage of this opportunity since listing in 2014. A strategy more focused on the travel division is showing signs of promise.
JD Sports
Markets are having to work out whether sluggish demand at JD Sports, reflected in lower like-for-like sales, is part of a cyclical or structural trend.
A weak economic backdrop is not helpful and while the youthful demographic targeted by the sportswear chain may not be weighed down by costs like servicing a mortgage or nursery fees, they still have less money in their pockets.
If it’s just a case of waiting for a more positive backdrop then shareholders must sit tight, with strong cash generation at least allowing JD Sports to reward patience with dividends and share buybacks.
However, a greater risk might be a waning of the athleisure trend which saw people wearing the same outfits for the gym, relaxing at home and socialising.
This has been supportive for JD Sports over several years, with the company’s offering well positioned to take advantage of it.
A larger than normal second-half weighting is another worry – with the risk that the company ends up having to downgrade guidance if the second half doesn’t make up the shortfall.
The company did address one of the nagging concerns facing investors as it said it didn’t expect to see any meaningful impact from tariffs this year.
Greggs
Publicans can rest easy about Greggs launching its first pub. This is a publicity stunt and nothing more.
Greggs is not going to open pubs across the country and steal punters from Wetherspoons or your local. Instead, it is launching a pop-up pub inside a department store and will close it down the day after Valentine’s Day next year. It’s often said that the way to a man’s heart is through his stomach, so perhaps Greggs is hoping to go out with a bang, and is banking on a touch of romance and a plate of sausage rolls to fill its pop-up pub.
Greggs will no doubt be anticipating pictures of its ploughman’s platter, and sausage rolls and mash going viral. It’s a clever marketing tactic, but not a new gameplan to expand from food-on-the-go to pints after work.
It’s already dabbled in similar ventures centred on a pop-up champagne bar and a bistro, not forgetting the cutting-edge fashion venture with Primark where the nation had the chance to buy Greggs-branded socks and hoodies.
Hats off to its marketing team, but it doesn’t ignore the fact that the business is finding it much harder to sustain strong sales growth for its core business. Competition is tough and consumer tastes are evolving, meaning Greggs is having to work overtime to find ways to stay on top.
Alibaba
One of the big trends this year has been the rise of Chinese companies as forces to be reckoned with in the AI world. First, we had DeepSeek taking the world by storm, and more recently there have been examples of Chinese groups embracing AI on a grand scale.
Alibaba is among the Chinese names spearheading the AI movement. It’s showing that big AI spending is not restricted to the West.
Having previously talked about a $53 billion target for AI-related investments, chief executive Eddie Wu has now indicated spending will go up even more. Expect to see expansion among both services and infrastructure, a move which implies that Alibaba is serious about embracing the technology and being a frontrunner.
There has been an element of biggest is best among US tech firms regarding AI, and now that mantra is being exported to other parts of the world. Investors are clearly excited, judging by the jump in Alibaba’s shares, but it’s only a matter of time before the narrative shifts to when it will make a positive return on this vast investment.
Beauty Tech Group
Beauty Tech Group has set the price range for its IPO, implying a market value of between £280 million and £320 million.
It’s good to see more companies head to the UK stock market but a company of this size is going to fly under the radar of most investors.
We’re in an environment where small cap companies are struggling to get investors’ attention unless they have a compelling narrative or tap into the hottest investment trends (i.e. artificial intelligence).
Beauty Tech is all about LED face masks, which is the talk of the town on social media, but also a competitive industry well served by big players. Beauty Tech will have to work hard to explain why its products are better than others, and how it is able to grow market share quickly.
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...
