The FTSE 100 was trading largely flat on Wednesday after giving up early gains driven by a rally in defence stocks amid rising political tensions.
London’s leading index was bouncing around the 9,245 level at the time of writing after US stocks recorded another fresh high overnight.
“European shares pushed ahead on a busy day for corporate news,” says Russ Mould, investment director at AJ Bell.
“A record-breaking day for Wall Street yesterday helped to calm investor nerves over Poland shooting down Russian drones that violated its airspace. Geopolitical concerns have been front and centre for multiple years, and investors had been hoping for tensions to ease.
“Oracle shares soared amid optimism about AI-related revenue, sending a strong message to the broader market that the tech revolution is still red hot. That had a positive read-across to Nvidia which advanced 2% in pre-market trading.”
The overarching hope of an interest rate cut by the Federal Reserve next week continued to propel US stocks higher as markets price in a reduction in borrowing costs.
However, investors will receive a raft of US inflation data during the remainder of this week, starting with PPI data on Wednesday and then CPI tomorrow. A much stronger-than-expected reading on either of these could pour cold water on rate cut hopes, although the readings will have to be significantly higher to unnerve equity bulls.
“Sentiment could turn sour if today’s inflation snapshot comes in higher than expected,” explained Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“The headline rate is expected to come in at 2.9% but the real number to watch will be core CPI, which strips out volatile food and fuel prices. Its broadly expected to be stable, coming in at 3.1% on an annual basis, but if it ticks higher month to month, it could put the cat among the pigeons.”
In the UK, DCC soared to the top of the FTSE 100 leaderboard after announcing it would return £800m in proceeds from the sale of its healthcare business. DDC shares were 4% higher at the time of writing.
BAE Systems joined the rally after Poland shot down a Russian drone that entered its airspace, raising geopolitical concerns.
AB Foods was firmly at the bottom of the FTSE 100 leaderboard as investors turned their noses up at slow Primark growth.
“Primark has long been the jewel in ABF’s crown, a retailer that’s thrived on value, volume, and an uncanny knack for reading the consumer mood,” explained Mark Crouch, market analyst for eToro.
“But today’s update raises more questions than it answers. Sales growth is slowing in Europe, flat in the UK, and while the US is picking up pace, it’s still not enough to counterbalance weakness elsewhere. For a business often seen as retail’s early warning signal, the signs don’t look good.”
AB Foods shares were down 10% at the time of writing.