The FTSE 100 defied a US tech selloff to push higher on Thursday as the relatively boring nature of London’s leading index provided a haven for investors seeking shelter from volatility in US mega caps.
“A catastrophic day for US tech shares hasn’t caused widespread contagion on the markets,” explained Dan Coatsworth, investment analyst at AJ Bell.
“While the Nasdaq had a miserable day on Wednesday, only Japan’s Nikkei 225 caught a cold in response. Its semiconductor industry might be affected if the US government gets heavier with measures to stop China getting its hands on foreign chip technology.”
The FTSE 100 was trading 0.7% higher at 8,247 at the time of writing in a broad rally that saw most sector gain.
London’s flagship index is comprised largely of stocks with defensive attributes and lacks the racier technology shares that have driven substantial gains in US indices. Of course, investors focused on UK stocks will have missed out on the sharp gains enjoyed in US stocks over the past two years but will certainly be relieved to be shielded from overnight declines in tech names such as Nvidia, Meta, and Advanced Micro Devices.
The catalyst for the selling was Donald Trump’s approach to relations with China and Taiwan and what it could mean for the sector should he win another term as president in November.
“Semiconductor shares have been some of the strongest in the market so far this year. At one point, Nvidia, the leading AI chip producer, became the world’s most valuable company,” said Steve Clayton, head of equity funds, Hargreaves Lansdown.
“Last night, however, investors took a very different view, leading to sharp declines in the prices of major chip producers, from Nvidia to AMD and beyond. An interview with Donald Trump, for Bloomberg Businessweek saw the former President casting doubt on US willingness to defend Taiwan, should he be elected in November.
“With much of the world’s most advanced chip manufacturing capabilities located within Taiwan, sixty-eight miles offshore China. That was not a message the market wanted to hear. Nor did it want to hear the Biden administration talking about tougher trade restrictions against China.”
Thankfully, London is largely immune to such concerns, leaving UK-centric stocks free to push higher after positive UK economic data. UK banks ticked higher and JD Sports had another good session with another 2% gain.
Asset managers and brokers had a strong with Schroders adding 5% and Hargreaves Lansdown gaining 1.5%. AJ Bell was a key driver for the sector after announcing robust customer additions in the last quarter.
Frasers Group was the standout performer as the retailer shares jumped 8% after announcing a 13% increase in profits amid a strategic push to revamp the brands it stocks.
Sports Direct was becoming a jumble sale of dead and dying brands, and the model was starting to infect House of Fraser stores. Today’s results signal progress in shedding this image, and investors will be pleased to see that it is translating to higher profitability.
“The so-called elevation strategy is moving along nicely, with more stores upgraded in the period,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“This improves the overall customer shopping experience by displaying products in a more flattering and digitally integrated environment, which is also helping to strengthen relationships with major global brands. These stronger partnerships should help unlock further growth opportunities and increase the brand’s ability to pull consumers into its stores. Increased automation at its warehouses, which significantly reduced inventory levels, should help improve profitability moving forward too.”