The FTSE 100 was firmly on the front foot on Wednesday morning after a US technology stock rally helped boost global equity sentiment. However, the gains diminished as the session progressed, taking the index into the red.
London’s leading index was 0.1% down at the time of writing.
‘An uptick in confidence has sent the FTSE 100 higher, after US tech staged a rebound, particularly the chipmaker Nvidia. Fears of a big imminent market wobble are now receding,” said Hargreaves Lansdown’s Susannah Streeter.
After Nvidia briefly became the world’s largest company by market cap, the chip maker shed around 10% at the end of last week raising fears of frothy valuation in AI-related stocks. Such is the size of Nvidia, any volatility in the price can move the S&P dramatically and sparked a wave of risk aversion.
However, a sharp rebound in the stock yesterday and further buying in the US premarket has dispelled fears of an imminent meltdown.
There was a notable risk-on tone in trading in UK stocks on Wednesday morning, with cyclical sectors at the forefront of Wednesday’s rally. Miners Glencore, Fresnillo, Rio Tinto, and Anglo American were having a good session. These gains ebbed as the session progressed.
Burberry rose over 1% despite RBC cutting its price target to 1,100p. Easyjet was the top faller, declining 1%.
Legal & General
Legal & General shares were among those trading in the red after HSBC downgraded the stock to hold. HSBC analysts slashed their price target to 260p from 310p citing disappointment with the company’s recent capital strategy announcement and future dividend growth.
“L&G’s new strategy and financial targets were (like its share price performance) underwhelming, and below our expectations. We see it as no longer offering a relatively attractive profile versus peers,” contributing HSBC analysts wrote in a note.
“L&G’s 9.3% normal dividend yield and 10.7% total capital return yield for 2024e might be attractive on an absolute basis, but not on a relative basis in our view. We see its UK peers offering either faster DPS growth over 2023-26e or a higher starting DPS yield for 2024e. Meanwhile the introduction of share buybacks by L&G (GBP200m in 2024) to potentially offset its lower DPS growth rate may not be sustainable for the long term.”