Daily market update: mining mega-merger talks, TSMC, Sainsbury’s

The FTSE 100 solidified its position above 10,000 on Friday after a mixed week which has seen the index attain fresh record levels.

The mood music around UK stocks remains positive, even if Christmas updates from the retail sector have not inspired too much cheer – a downbeat update from the British Retail Consortium on footfall only adding to the gloom.

The mining sector continues to be a plus point for the FTSE 100 with Glencore and Rio Tinto confirming talks about a merger which would create the world’s largest miner.

The divergent share price reaction would suggest the market thinks Glencore would be the bigger beneficiary of a deal. A key driver for the merger is the scramble for copper given its role in electrification and constrained supply.

Attention is likely to turn to US jobs numbers and a US Supreme Court decision on the Trump administration’s tariff policies. If the court strikes down the tariffs, there may be positives for investors, but it could also hit government revenue, potentially prompting an increase in Treasury yields which would have ripple effects in the wider financial markets.

TSMC

There is little sign of a slowdown in the AI boom in TSMC’s latest quarterly revenue which managed to beat already elevated forecasts.

Investors will have to wait until next week for the earnings to be reported in full, when there will be close attention on what the company has to say about the outlook for the current quarter and the whole of 2026.

TSMC’s dominant market position has enabled it to capitalise on the huge expansion in AI spending in recent years and this has compensated for the easing revenue associated with chips used in consumer electronics.

Fellow Taiwanese outfit Foxconn, which is the largest contract electronics manufacturer, also unveiled bumper sales earlier this week.

For both companies it is their position at the nexus of a key geopolitical hotspot in an increasingly uncertain world which may be the nagging concern for investors. Particularly, if this starts to act as a driver for customers to meaningfully diversify their supply chains.

However, TSMC’s scale and expertise remains unrivalled in the chip making universe and there is little sign of that changing for now.

Sainsbury’s

Dan Coatsworth, Head of Markets at AJ Bell, comments:

There are a lot of similarities between Sainsbury’s and Marks & Spencer – both have strong food arms offsetting weakness elsewhere.

Sainsbury’s clearly had a bumper Christmas for grocery sales, enjoying notable success with its premium range. However, Argos continues to be the thorn in its side with another period of weakness.

This persistent underperformance only strengthens the argument for Sainsbury’s to get shot of Argos as fast as it can.

The market is losing patience about the non-grocery side given the negative share price reaction to Sainsbury’s figures.

Without the clothing and general merchandise contributions including Argos, investors would have been singing from the rooftop about Sainsbury’s Christmas performance. The fact it has sustained strong momentum in the food arm for so long shows it wasn’t just a stroke of luck. It has clearly hit upon the right recipe for success.

Chief executive Simon Roberts will be under increasing pressure to do something to remove the shackles on the group. A bid approach for Argos was rejected last year, with the implication that China’s JD didn’t offer enough.

Formally putting Argos up for sale might flesh out more interested parties. Sainsbury’s might even have to take the view that it doesn’t really matter what price it gets for Argos, simply offloading the business would help to sharpen the company’s focus and potentially deliver greater benefits in time.