While it may not be replete with the technology names which have enjoyed a big comeback in recent days, the FTSE 100 was still on course for a positive end to the week.
Strong numbers from Nvidia and other tech sector constituents like Crowdstrike and Salesforce have helped shore up market sentiment, supported by some hints at dampened tensions in the Middle East.
The next test of investors’ mettle will come later when Federal Reserve chair Kevin Warsh addresses the Jackson Hole Symposium of central bankers and politicians. While immediate concerns about levels of government debt may have eased, with bond yields coming back down, the underlying issues haven’t gone away.
The market will want to see some evidence that Warsh has a plan on how to tackle inflationary pressures and will also be hungry for visibility on the likely trajectory of interest rates.
Having shot back above $90 per barrel yesterday on suggestions from Washington that there are no live negotiations with Iran, the price of oil has settled back below this threshold on signs that some exports from the Gulf are making it through.
In London, miners made progress, with gold prices holding above $4,600 per ounce as its safe haven credentials were in demand in what remains a volatile geopolitical and economic backdrop.
Defence Stocks
Shares in contractors BAE Systems, Babcock, Chemring and Qinetiq fell on uncertainties about whether the UK government would maintain its target of spending 3% of GDP on defence by 2030, let alone 3.5% of GDP by 2035.
A report in the Financial Times implied Chancellor John Healey might reappraise this target and that any major decisions on defence spending would be delayed until a Treasury spending review next year.
Defence stocks were among the first to rally when Healey was appointed chancellor in July as investors thought he wouldn’t backtrack on a spending commitment agreed when he was defence minister.
Having had time to look more closely at the state of the public finances and the broad spread of spending aspirations, Healey might have realised that fiscal discipline challenges were greater than he previously thought.
McBride
McBride has struck a material deal with home care business Vestacy which was carved out of consumer goods giant Reckitt earlier this year. Vestacy presides over major brands including Air Wick, Calgon and Cillit Bang, and is putting its faith in McBride to manufacture a variety of household laundry products.
This isn’t a casual ‘you make it, we sell it’ agreement. Instead, it is McBride getting an important foot in the door with an important company backed by Advent, a private equity group with deep pockets. McBride will take over two of Vestacy’s manufacturing sites, with the partner funding £34 million of additional equipment to help boost output capacity.
There are multiple benefits to McBride. These include better earnings visibility as the Vestacy work is a long-term contract, the commencement of what could be an important relationship with a major brand owner, and a stronger foothold in the laundry market which is one of its priority growth areas.
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...
