Interest rate hopes are back! After a couple of weeks of malaise following Federal Reserve and Bank of England decisions to keep interest rates on hold, a speech by Fed Chair Jerome Powell has once more ignited hopes of rate cuts later this year.

Equity bulls jumped on the Chair’s comment and sent the S&P 500 to record highs in the US overnight. UK traders didn’t need asking twice to bid up the FTSE 100, which was trading 0.5% higher at the time of writing.

“The FTSE 100 has opened higher, riding on the coattails of the fresh enthusiasm which swept over Wall Street, with any political uncertainty pushed into the background,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Stocks have largely been driven upwards by hopes that interest rate cuts are on the horizon and a soft landing is in sight, thanks to encouraging comments from the chair of the Federal Reserve.

“Jerome Powell said that the US is back on a disinflationary path due to recent weaker inflation readings.  He stressed that policymakers are wary of keeping monetary policy ‘too tight for too long’ and losing expansion in the economy.”

Macroeconomics could well help propel stocks higher through the rest of the week with Fed minutes due out this evening and June Non-Farm Payrolls set for release on Friday.

The FTSE 100’s gains were broad on Wednesday, with 85 constituents trading higher at the time of writing. Cyclical sectors enjoyed buying pressure as risk appetite grew.

IAG was the top riser, gaining 4%, closely followed by Fresnillo who was helped higher by a bid in gold and silver.

Precious metal prices slipped after recent central bank meetings suggested the market would have to wait for rate cuts – prices showed signs of reversing on Wednesday with a potential interest rate cut on the horizon.

JD Sports was the biggest faller after Barclays cut the stock to underweight with a 110p price target. The downgrade follows poor results from Nike, the brand that accounts for around 50% of JD Sports sales.

It’s difficult to think of a UK-listed company better placed to enjoy the policies of a Labour government than green energy microgeneration specialist Good Energy. 

Good Energy has made the transition to a full-service, end-to-end green energy services provider for UK households, helping them improve fuel efficiency and reduce their carbon footprint with heat pumps, solar panels, battery storage and EV charging points.

Under the Conservative government, Good Energy were largely limited to conscientious homeowners with readily available capital to take on the cost of installing power generation such as heat pumps and solar panels.

A Labour government and additional support for households to improve the green credentials of their properties will open up an entirely new section of the market for Good Energy. The market is currently underestimating this. 

In their manifesto, Labour set out its ‘Warm homes plan’ promising to help slash heating bills and reduce the UK’s reliance on overseas sources of fossil fuels. Labour says its will double the Tories commitment to improving household energy efficiencies by investing an additional £6.6bn.

This is a substantial sum earmarked for cutting power bills for five million homes. These are five million homes that have the potential to be Good Energy’s customers over the next parliament.

Although the details about Labour’s plans are scant, it did say in its manifesto it would facilitate low cost loans and grants to help households improve fuel efficiencies through the use of solar panels and batteries.

The Conservative government had targeted 600,000 heat pump installations per year by 2028. One would expect Labour to ensure they supercede this figure. This would be great news for Good Energy shareholders after the company acquired a specialist solar and heat pump installation company at the beginning of 2024.

Good Energy focuses on the premium end of the heat pump market, catering to homes requiring more complex installations. This area of the market commands installations 7.5% larger than the top 200 UK installation companies, providing Good Energy with margins of 25% to 30%.

In its recent full-year results, Good Energy said the ‘solar sector is booming’. Nothing suggests this boom will end anytime soon and everything points to the number of Good Energy’s solar customers increasing from the current 180,000.

EVs

Although Labour have been relatively quiet about electric vehicles, a truly green policy agenda targeting net zero goals can’t be achieved without support for the adoption of EVs. One would expect this to come later in the parliament.

When it does come, Good Energy’s investment in Zapmap, the UK’s largest EV charging point mapping app, will look very sensible indeed. Zapmap has a 70% share of the UK market EV users and has a diverse model that allows drivers to book and pay for EV charging points while providing Zapmap crucial data that can be provided to the wider market.

In addition, as part of their end-to-end clean energy service expansion, recent acquisitions bolster Good Energy’s capabilities in the EV charging installation arena.

Good Energy has set out a growth plan that will likely succeed in any political environment. A Labour government will accelerate these plans.

Adventurous investors should be ready for a wild ride in the shares of a small Artificial Intelligence company that is now moving apace.

Last October Cykel AI floated on the Aquis Exchange, taking the first stage of its potential development on what is sure to become a much-watched project.

Earlier this year a Main Market listed company, Mustang Energy (LON:MUST), agreed to acquire the Cykel AI business in an all-share deal, valuing it at £19.22m.

In what is effectively a Reverse Takeover, Cykel has taken control of the Main Listed vehicle.

The Cykel AI Business

Cykel AI is a software business developing advanced artificial intelligence products, intending to offer these to consumers through a ‘software as a service’ (SaaS) model.

The company is developing a machine learning model that seamlessly engages with all facets of the user’s computer environment.

The model will be trained to harness the capabilities of all existing software tools, application programming interfaces (APIs), and web-based applications, a novel methodology for task execution, translating user objectives articulated in plain language into tangible actions executed within their daily software applications.

The company’s software is intricately designed and trained to execute commands in response to natural language directives, specifically within the realm of computer interfaces.

Still A Very Early-Stage Developer

Cykel is an early-stage company that intends to grow quickly through the operation of a software business engaged in the development of advanced artificial intelligence (AI) products.

The rise of potent Natural Language Processing (NLP) text generators, exemplified by OpenAI’s ‘GPT-4’, will serve as a catalyst for the widespread adoption of AI-driven business applications.

As NLP-based text generators gain mainstream prominence, Cykel anticipates organisations embracing specialised ‘value add’ applications that augment their business operations.

This strategic orientation underscores Cykel’s expectation of a burgeoning market for business applications propelled by the maturation of NLP technology.

Cykel has developed an AI-Powered Task Operating System as a Google Chrome extension.

This core software, including all front and back-end coding, integration work with third party providers, and publishing of Cykel’s extension was completed in Q4 2023.

Cykel’s AI-Powered Task Operating System (Task OS) is designed to bring AI capabilities to the world of task management, providing users with a platform for streamlined workflows, intelligent task prioritisation and cross-platform integration.

Mustang and Cykel AI

The Combined Group intends to expand in the following areas:

·      B2B Sales: Cykel intends to market directly to B2B companies and expand its marketing in the UK, Europe and North America. The goal is to grow a client base materially in 2024 based on the successful launch of the product in Q1 2024.

·      Partnerships: Cykel intends to market through partnerships with organisations that are selling to the B2B software market.

·      Technology: Cykel intends to offer more software features as it expands its client base. The technology roadmap will be driven primarily by user feedback from both customers and project partners.

Cykel’s AI software aims to be available on a ‘freemium’ basis.

As such, the basic usage tier will be free, but ‘software as a service’ fees will be incurred over a certain amount of requests per month.

Management Comment

On 10^th May Alan Broome, Chairman of Mustang, informed his investors that:

“The Acquisition presents an exciting opportunity for Mustang shareholders to engage in the burgeoning growth of a dynamic, young company.

Cykel’s innovative AI-Powered Task Operating System stands poised to revolutionise organisational efficiency, automating repetitive tasks and furnishing invaluable data-driven insights for strategic decision-making.

We firmly believe this Acquisition aligns with our strategic objectives and offers compelling financial prospects for our shareholders.”

At the same time, Jonathan Bixby, Executive Chairman of Cykel, stated that:

“We are very excited about the prospects of trading on the London Stock Exchange.

The field of Artificial Intelligence is one of the most exciting technology trends in the world and allowing more investors access to this trend is a positive outcome for Cykel and our shareholders.”

Change Of Name To Cykel AI Plc

Yesterday it was announced that the company (formerly Mustang Energy PLC) has changed its name to Cykel AI PLC.

Following the name change, the Company’s ticker symbol, under which its shares are traded on the Main Market of the London Stock Exchange, will be changed to CYK. 

The Shares

The enlarged group’s shares are now trading at around the 5.50p level.

With the massive investor interest in the AI sector, the big question now is are you ready to ride this CYKlone?

The FTSE 100 fell on Tuesday as investors held off bullish bets ahead of a raft of central bank action and major economic data later this week.

Trading on Tuesday had a distinct risk-off tone. It was as if the traders were double-checking their work from yesterday when markets bid up equities.

The optimism surrounding the UK election seems to be fading as the reality of immediate uncertainty hits home. The relief rally about the far right in France not winning a majority has been replaced with concerns about a hung parliament. 

The FTSE 100 was down 0.55% at the time of writing, and the French CAC 40 dropped 0.9%.

Higher US bond yields were also thrown into the mix on Tuesday and markets reacted by selling stocks. The timing of the first US rate cut is becoming increasingly uncertain with some commentators suggesting the Fed won’t cut until 2025. Higher bond yields are rarely good for shares and European stocks fell across the board on Tuesday.

Non Farm Payrolls set for release on Friday will provide the next material insight into the US economy and the Fed’s likely next move. 

“Without a positive contribution from the big oil producers, the FTSE 100 would have experienced an even worse day than it already has done. Falling 0.5% in early trading to 8,128, most sectors were in the red apart from oil and gas, with BP and Shell rising on the market thanks to oil prices extending yesterday’s rally to trade at their highest level since April,” said Russ Mould, investment director at AJ Bell.

“Investors are eagerly awaiting new US jobs data and a speech from Federal Reserve chair Jerome Powell, two events which could provide the all-important clues on how the central bank might act with monetary policy.”

Yesterday’s rally in the housebuilders continued with positive housing data providing a reason for investors to be optimistic. Persimmon and Taylor were among the few gainers, as were oil majors Shell and BP.

Beazley experienced heavy selling after a switch in divisional management, with shares down 5%. The insurance group was the FTSE 100’s top faller.

Sainsbury’s shares slid 1.7% as investors digested recent trading figures. Although the supermarket enjoyed higher sales in the first quarter, the pace of growth declined substantially.

“Sainsbury’s has the same nagging feeling as the England football team – it eventually scores a goal but you know it could do a lot better,” Russ Mould explained.

“On the one hand, the food business is trucking along nicely and the grocer is winning market share. On the other hand, non-food items across clothing and general merchandise including Argos aren’t resonating with its customer base.

“Sainsbury’s has a food-first strategy so it might argue that as long as the core part of the business is doing fine, the rest will eventually catch up. However, the non-food operations have been letting the side down for a long time and causing unwelcome distractions for management when they could be doing even more to capitalise on the new-found strength in food.”

Sainsbury’s shares were on offer on Tuesday after the supermarket said sales growth had slowed and price inflation slows.

Higher prices last year were always going to make the comparables tough as inflation slowed. Sainsbury’s sales growth has slowed to 2.7% in the first quarter, compared to 4.8% last quarter and 9.8%

Although soaring inflation last year can account for the plateauing of sales growth, such a step down is a bitter pill for some investors to swallow.

Investors may be concerned about a mismatch between lower sales prices and input costs results in squeezed margins in the coming periods. Concerns about margins and a general slowdown in sales growth were enough to send investors to the checkout on Tuesday, and shares slid 2%. 

“At first glance, it’s a bit tough to work out what sort of results have landed in Sainsbury’s bagging area,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Ultimately, the reduction in the rate of growth was partly to be expected, especially in grocery. As inflation cools, the weather worsens and tough comparisons crop up on the course, eking out the amount of growth seen last year was always a difficult ask. But there is a lingering Sainsbury’s specific issue in its ownership of Argos.”

Lund-Yates continued to explain that while Argos can provide excellent exposure to areas outside of groceries, it is a highly cyclical business that suffers when consumer tighten their purse strings.

“Electronics aren’t faring well in this economic climate, as people prioritise the essentials. General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena really slows you down when times get tough. The additional exposure offsets and hides what has been a remarkable showing for the core grocery business.

“Sainsbury’s was having a bit of an identity crisis, straddling the more vulnerable middle-line between premium and value. An awful lot of work has gone into improving products, value perception and innovation more generally, giving the group enough gusto to start moving market share in the right direction. AI ambitions to improve real-time customer service and experience are grand but a bit thin on detail, so an area to watch.”