Archived article: Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
A barrage of US companies are expected to announce big investments in the UK to coincide with Donald Trump’s state visit, says Russ Mould, Investment Director at AJ Bell.
They are guaranteed widespread publicity and will likely please Trump by making the US look good.
Google-owner Alphabet is the latest name in the frame, with news it will spend £5 billion in the UK on AI-related infrastructure investments and scientific research, creating jobs and helping the country to keep abreast of major technological changes. Unlike many countries, the UK has a solid relationship with the US, and announcements such as Alphabet’s will help to keep things sweet.
Despite the headline-grabbing news, the expected wave of US investment wasn’t enough to lift the UK stock market. The FTSE 100 fell 0.2% to 9,258 as most sectors were in the red apart from those related to ‘hard assets’, namely real estate and commodities.
The FTSE 100 gets more than two-thirds of its earnings from overseas, so even policies that can potentially boost growth domestically may not have the impact on the constituents of the UK’s leading stock market index that some might expect.
EasyJet was the biggest faller on the FTSE 100 after a broker downgrade acted as a headwind for the stock. JPMorgan cut its rating from ‘overweight’ to ‘neutral’, souring investor sentiment towards the airline.
Nvidia shares slipped in pre-market trading on talk that its RTX6000D chip aimed at the Chinese market hadn’t attracted much interest. The company has been keen for greater access to China amid fierce restrictions from the US government. Therefore, to see a lacklustre response to something it is allowed to sell will be a major disappointment to the chip giant.
TikTok
An update on TikTok’s future in the US has the classic hallmarks of a Trump manoeuvre – hints of a deal without any detail.
The social media app has become entangled in trade talks between the two countries. Neither side wants to be seen as weak, but there is also a desire to keep trade flowing between the two sides.
Progress on TikTok’s future in the US and US-China trade agreements more broadly have been slow, and they look set to drag on. China will want to keep TikTok operating in the US because it is embedded into the lives of millions of people and is one of the Asian superpower’s biggest tech success stories over the past decade. It demonstrates China’s capability of creating something that is now a global force.
On the other side of the equation, the US has security concerns around the app, such as whether China is spying on users and if it might use the platform for propaganda.
Finding a middle ground that satisfies both the authorities in the US and China has proved to be difficult to achieve, which makes the prospect of a framework deal on TikTok’s US somewhat curious. More information is expected on Friday, and the structure of any potential agreement could provide hints to how future deals are struck more broadly between the US and China.
There had previously been a suggestion that TikTok’s owner ByteDance licences its algorithm to a US party or consortium to ensure continuity of service in the States. Oracle has been tipped as having a key role in this service. If true, that could build on the good news that’s surrounded the business in recent weeks, with Oracle’s shares having recently rallied on the company showing it is the latest beneficiary of the red hot AI trend.
Unilever
The appointment of an insider to the role of chief financial officer at Unilever makes sense when you consider the company is committed to a strategic plan which has been in place for some time.
Srinivas Phatak is a company veteran no less and, importantly, has been operating as acting CFO since February when his predecessor Fernando Fernandez stepped up to the top job.
While bringing in an outsider can offer a fresh perspective, retaining some continuity and having a senior leadership team which already has experience of working together is logical while the company completes its ice cream demerger and focuses on its so-called ‘power brands’.
Both Fernandez and Phatak will be judged on the success or failure of this strategy and its ability to deliver consistent growth.
In the West, Unilever faces the challenge of shoppers trading down to cheaper own-brand products. Much of its future growth may have to come from emerging markets where the threat posed by unbranded alternatives is less and where, for reasons of quality and safety, shoppers will stick with familiar names where possible.
Kier
The latest results from Kier are a decent parting gift from CEO Andrew Davies. He joined when the company was still reeling from a damaging period which encompassed a highly dilutive fundraising, accounting errors, major write-downs, substantial losses and a revolving door of bosses.
Slowly, but surely, Davies has rebuilt the foundations of the business, and he hands it over to his successor Stuart Togwell in much better shape than he found it.
A record order book and a strong balance sheet are the most significant bits of evidence of Davies’ work, and it is notable the company is trading ahead of expectations for the current financial year. The construction sector in the UK remains uneven but the company has focused on growth areas like infrastructure, and this has paid off handsomely.
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...
