The FTSE 100 dropped again on Friday as concerns about AI valuations returned with a vengeance overnight, with Nvidia giving up 6% gains to close negative.
The S&P 500 closed 1.6% lower, and the tech-focused NASDAQ shed 2.2%.
Such heavy selling was difficult for European traders to ignore, and the FTSE 100 lost 0.6% in early trade.
“It seemed, for a while, yesterday that everything was right with the world once again. Nvidia delivered strong earnings on Wednesday, reigniting some enthusiasm around the AI theme, and the September jobs report was a solid-ish one, albeit a report that had a few blots on the copybook under the surface,” explained Michael Brown Senior Research Strategist at Pepperstone.
While the lower start to trade on Friday will be a kick in the teeth for bulls that thought Nvidia had saved the day with a seemingly upbeat earnings report, London’s leading index did pick up from the worst levels as bargain hunters stepped in.
The FTSE 100’s cyclical sectors were heavily hit on Friday. Investors rotated out of miners, engineering firms, and technology-oriented investment trusts.
Babcock was also among the losers despite reporting a very respectable set of half-year results. Babcock shares were down 1.2%, most likely due to wider selling rather than any real disappointment given a 7% jump in revenue and higher profits.
“Babcock’s latest results will make even the most hardened defence investors sit up a little straighter. A 19% jump in first-half operating profit and a 25% dividend hike would be eye-catching in any sector; but in a business better known for long-cycle contracts and cautious guidance, it’s confirmation that Babcock is well and truly firing on all cylinders,” said Mark Crouch, market analyst for eToro.
“The British engineering and defence group has powered down debt, sharpened execution and turned itself into one of the London market’s most consistent outperformers. It helps, of course, that governments are rediscovering the urgency of naval capability. From Danish and Swedish frigate tenders to a Polish submarine partnership with Saab, Babcock is suddenly the name on every northern European admiral’s lips.”
JD Sports was another notable faller, as the decline after yesterday’s trading statement continued. JD is now trading at its lowest levels since July.
Persimmon was the FTSE 100’s top riser, up 2.2%.