The FTSE 100 slipped on Thursday as mounting geopolitical pressure and the threat of higher interest rates weighed on markets.
But the gains were measured compared to the FTSE 100’s rally, with the index down 0.2% at 10,696.
Susannah Streeter, Chief Investment Strategist, Wealth Club, said: “Investors are in a wary mood, with London’s FTSE slipping into the red in early trade, as fresh jitters of worry about the ongoing energy crunch hit sentiment.
“Brent crude has barrelled above $97, heading towards the $100 mark, as escalating Middle East tensions raise the risk of deeper supply disruptions and threats to vital energy arteries including the Strait of Hormuz.”
In addition to contending with energy prices, investors received their first instalment of major tech earnings of the season last night with Tesla and Google-owner Alphabet reporting after the bell.
Both were down in the premarket as NASDAQ futures fell.
Tech earnings are in focus this week as investors brace for earnings from the companies that have powered surging gains for US indices over the past couple of years.
Lale Akoner, global market strategist for etoro, said: “Alphabet and Tesla are showing two very different stages of the AI investment cycle. Alphabet is spending heavily, with capital expenditure expected to reach as much as $205 billion this year, but investors can already see some return. Google Cloud revenue rose 82%, its backlog reached $514 billion, and demand for AI infrastructure is turning new capacity into sales.”
The big concern for investors, and the reason Alphabet shares were down 4% in the premarket, is higher capex spending, which could threaten cash flow in coming periods. There were a few positive takeaways for Tesla who down a similar amount.
“Tesla is asking for more patience. Vehicle deliveries recovered, but discounts weakened profitability, free cash flow turned negative, and spending on AI, robotaxis and robotics is rising before these businesses generate meaningful revenue. That makes Tesla’s investment case more dependent on future execution than current earnings.”
In London, there were several big movers on the back of updates and results.
Centrica was the FTSE 100’s top faller, shedding 7%, on the assertion that its outlook would be ‘subject to the usual uncertainties’.
“The volatility in energy markets is creating some headaches for Centrica although the company still allowed for a generous increase in the dividend,” said AJ Bell investment director Russ Mould.
“You might think the renewed spike in energy prices is untrammelled good news for the business, but Centrica’s results reveal a more complicated picture.”
3i was the top of the leaderboard after reporting strong portfolio performance in its first quarter. Shares were 6% higher at the time of writing.
Another notable update came from RELX, which appears to be benefiting from AI rather than suffering from disruption investors feared would hit earnings.
“RELX has delivered the kind of result investors needed to see, with growth accelerating in the two divisions most exposed to concerns about AI disruption,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Underlying growth reached around 6% in Scientific, Technical & Medical and 10% in Legal, while margins, earnings and cash flow look strong. That strengthens the case that AI is enhancing RELX’s valuable data and tools rather than undermining them, with improved guidance for the scientific publishing business pointing to momentum holding through the rest of the year.”
SEGRO was 6% higher after the board announced they would be minded to accept the latest takeover offer.