The FTSE 100 was relatively flat on Wednesday as London’s defensively oriented index weathered the storm in US tech overnight.
UK-focused investors are sometimes frustrated by the lack of technology stocks in London, which means our flagship index misses out on the outsized gains we see over the pond.
But on days like yesterday and today, when the defensive attributes of the FTSE 100 kick in, sheltering the index from the worst of the volatility we see overseas, London’s leading index can seem like a sensible place to be.
Despite the NASDAQ closing down another 2.2% yesterday, the FTSE 100 was trading almost dead flat at the time of writing.
“While a red day on Wall Street on Tuesday put investors on edge, it didn’t trigger contagion across global markets,” says Dan Coatsworth, head of markets at AJ Bell.
“The Nasdaq fell 2.2% and the Vix measure of volatility jumped 13%, prompting investors to worry if we’re on the cusp of a new market meltdown. Fortunately, Asian and European markets showed resilience on Wednesday and helped to settle nerves.
“This suggests the US tech sell-off was simply a bout of profit taking after a stellar run for memory chip suppliers. Semiconductor group Micron reports results today, and certain investors will have taken the view that it is better to travel than arrive, cashing out before the results in case the numbers don’t smash expectations. Micron’s shares are up 269% year-to-date, which is a stellar performance in anyone’s books.”
Profit-taking in the racier areas of the US stock market was mirrored in London, with investors selling down positions in more cyclical sectors, including miners, for a second day running. Financials were also weaker on the session.
Airtel Africa shares were down 4% after a large shareholder reorganised its holdings.
But weakness in these names was offset by the property sector after SEGRO rejected a bid from a US peer and Berkeley Group released upbeat results.
SEGRO was the FTSE 100 top riser after rejecting a 925p bid from US-based Prologis that appears to be seeking to exploit SEGRO’s deep discount to NAV and increasing demand from AI data centres.
“The expansion of logistics property plays into data centres is taking a dull area to more interesting places and that’s evident in the takeover interest in Segro,” said Dan Coatsworth.
“It’s hard to believe San Francisco’s Prologis would have been interested in Segro when it was simply focused on warehouses. Prologis specifically references the target’s pipeline of data centres in its rationale for the deal.”
SEGRO shares were 17% at the time of writing at 869p.
Berkeley Group’s upbeat results helped lift FTSE 100 peers Persimmon and Barratt Redrow.