The FTSE 100 rose on Wednesday in line with a global equity rally as US tech rebounded following positive earnings from a company at the heart of AI spending concerns.
Although the FTSE 100 lacks major exposure to the AI trade, traders were happy to push the index up 0.3% as sentiment continued to improve after a bout of volatility following the US midterms.
The German DAX added 0.6%, and the French CAC gained 0.4%. The FTSE 100 underperformed due to weaker consumer-facing stocks.
CoreWeave shares surge
US indices closed lower overnight before CoreWeave reported bumper revenue growth, sparking a rally in AI-related stocks ravaged in the wake of the midterm results.
While questions remain about the company’s leverage and valuation, investors will have been delighted to see revenue surge 168% to $3.6bn.
“An upbeat earnings report from neocloud provider CoreWeave, which had faced intense selling pressure, has sparked an uptick in enthusiasm for AI-focused stocks,” said Susannah Streeter, Chief Investment Strategist, Wealth Club.
“Results exceeded expectations and the company raised its full-year outlook. Nevertheless, its debt levels and high servicing costs still remain a concern, and it has begun another complex financing arrangement with an investment-grade customer, allowing that customer to own infrastructure directly and helping CoreWeave fund its enormous expansion.”
CoreWeave shares were up 12% in US premarket as peer Nebius rose 11%. NASDAQ futures were 1.7% higher at the time of writing.
FTSE 100 movers
A strong trading update from Spirax Group saw the engineering firm rise to the top of the FTSE 100 leaderboard. Spirax shares were 3.8% after announcing strong sales enjoyed earlier in the year continued through October. The group said it was on track to meet expectations.
Computacenter, the FTSE 100’s go-to AI play, was 2% amid the rebound in US tech stocks.
Barratt Redrow fell as it dropped in sympathy with Taylor Wimpey, which reported a declining sales rate and orderbook.
“It’s a bad time to be a housebuilder with the prospect of interest rates going up, mortgage affordability deteriorating, and consumers feeling the pinch from higher energy costs. The housing market is suffering and that is translating into weak demand for new builds,” explained Dan Coatsworth, head of markets at AJ Bell.
“Taylor Wimpey is caught up in a perfect storm. That’s led to a warning that full-year operating profit will come in at the bottom end of the consensus forecast, causing the share price to pull back.”
Barratt Redrow dropped 1%.
JD Sports was the FTSE 100’s biggest loser, down 2.7%. Diageo and Kingfisher were among other consumer brands to feel the pinch on Wednesday.