The FTSE 100’s defensive attributes were on show on Thursday as the index marched higher despite heavy selling in US technology stocks overnight.
The NASDAQ closed down 1.8% yesterday, while the S&P 500 fell 1.1% after US CPI 3.7% came in hotter than expected.
“Yesterday’s CPI numbers were a bucket of cold water for dovish hopes. The data confirmed that inflation continues to run above target in the US, and more importantly, it is moving further away from it,” explained Daniela Hathorn, Senior Market Analyst at Capital.com.
Inflation fears sparked a wave of selling in technology names, particularly those heavily involved in AI.
“The tech sell-off has continued with pace, exacerbated by US inflation data which increased expectations for US interest rate hikes this month,” said Dan Coatsworth, head of markets at AJ Bell.
“Tech investors are getting uncomfortable with the amount of debt being used to fund the AI build-out. There is a growing fear that big names in the tech space are running too fast, and they’re primed to trip up. Reports about Anthropic’s third quarter revenue suggest it isn’t growing as fast as expected, which added to fears that the AI euphoria might be hard to sustain.”
The wobbles in US AI stocks favoured London-listed companies that had seen their share prices fall amid fears of AI disruption.
Experian was the FTSE 100’s top riser, adding 3.5%. RELX rose 2.4% while LSEG increased 2.5%. Autotrader jumped 3.3%.
These digital and data focused stocks played a leading role in the FTSE 100 rising 0.5% on Thursday.
Concerns around AI also drove investors in companies that provided more traditional goods and services such as hotels rooms, tobacco and good old fashioned commerical real estate.
Whitbread rose 2.6% and touched the highest level since the start of the Middle East conflict earlier this year. Imperial Tobacco and BATS were also among the gainers.
Miners were among the biggest detractors on Thursday as metals prices fell on concerns about lower demand from the AI infrastructure buildout. These may prove over blown, but traders preferred to take the sell now, ask questions later approach.
“Copper prices fell 1.6%, triggering a sell-off in base metal producers,” Dan Coatsworth explained.
“Miners like Antofagasta and Anglo American were seen as prime beneficiaries of the AI boom as copper is a crucial raw material for the power build outs. Any idea of an AI bubble, and one that is primed to burst, could fuel fears that copper demand might not live up to lofty expectations. That could take some heat out of the market.”