The FTSE 100 rose on Monday as oil prices fell, helping fuel a move higher in cyclical names as inflation concerns eased on hopes of a resolution to the US/Iran conflict.
London’s leading index ticked higher early Monday after Trump said it was ‘highly likely’ the US would hold off strikes on Iran if diplomatic efforts progress.
Brent oil was trading down by nearly 2% at $96.72 at the time of writing.
However, the leading story of the day was news that Nvidia boss Jensen Huang was under investigation by the board following revelations he’d had an affair with a possible Chinese spy.
Buy-the-dippers will be dismayed to see the headlines break yesterday after the AI sector surged off the lows on Friday and looked set to continue the rally into this week.
But the recovery has been derailed by the scandal, with Nvidia falling 4.5% and taking other AI-related stocks, such as the neoclouds, with it amid ongoing worries about spending and how the Democratic midterm victory will affect the rollout.
“The rebound looks more like a tentative recovery in risk appetite than a convincing reversal of the recent downtrend,” said Daniela Hathorn, Senior Market Analyst at Capital.com.
“Investors are taking advantage of lower valuations, but concerns about AI profitability, elevated borrowing costs and potential regulatory changes following the US midterms remain unresolved.
“One notable development that could complicate the recovery is the controversy surrounding Nvidia CEO Jensen Huang. The company has launched an independent investigation following reports that Huang may have been targeted by a foreign intelligence operation, raising questions about corporate governance and potential national security implications.”
The FTSE 100’s lack of tech exposure again proved to be a blessing on Monday, with the index free to move higher as mining companies rallied.
“Gold miners were higher as the precious metal found some sparkle and other mining shares also benefited from rising prices for industrial metals. These commodities benefited from weakness in the US dollar and a recent easing in government bond yields,” explained AJ Bell investment director Russ Mould.
Endeavour Mining rose 3.7% while Fresnillo gained 3.2%. Copper miner Antofagasta was the FTSE 100’s top riser, adding 3.8%.
Lower oil prices sparked a broad rally, with around 80 FTSE 100 constituents higher. IAG rose with traders hoping jet fuel prices could fall in the coming months.
Barratt Redrow was the FTSE 100’s biggest loser, down 1.1%, as the stock nears the end of a technical triangle formation that could see the housebuilder break out in either direction soon.