The FTSE 100 found a response to rising interest rate tensions and souring sentiment on Thursday as early losses were met with a bid for Uk stocks in early trade.

Markets had been almost euphoric at the beginning of May so the step down in sentiment was to be expected, yet it still doesn’t soften the blow for investors looking at a FTSE 100 that’s fast approaching the 8,000 mark.

We noted earlier in the week a raft of Federal Reserve speakers would be scrutinised for their comments on inflation and interest rates and the mood music hasn’t been favourable with bond yields rising.

“Treasury yields have risen to four-week highs, following relatively cautious comments from the Federal Reserve about the interest rate cutting cycle, which has dented market confidence,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

Concerns about US rates inevitably translate to concerns about UK interest rates, and the poor overnight session in the US played a part in the FTSE 100’s decline early on Thursday. 

Although the index started in the red, London’s leading index staged a midmorning rally and turned positive with the index trading at 8,197, up 0.17% at the time of writing.

With important US PCE data set for release later in the session, one would expect a choppy day for stocks as traders react to expectation of when the Federal Reserve will cut rates.

“European markets dug their heels in and tried to stop the declines that dominated yesterday’s headlines. The FTSE 100 was firm, the IBEX 35 nudged ahead 0.7% and the Dax dipped 0.2%. Stability is welcome, but pre-market indicative prices point to another bad day on Wall Street so the jury is still out whether today is going to end up being another difficult session for equities or not,” said Dan Coatsworth, investment analyst at AJ Bell.

Autotrader

Autotrader accelerated to the top of the FTSE 100 leaderboard on Thursday after posting upbeat full-year results in which revenue grew 12% despite a general slowdown in new car sales. The company has enjoyed a buoyant second-hand car market that sees second hand cars no selling faster than before the pandemic.

“It’s hard not to be impressed with Auto Trader’s rise since its 2015 IPO. The UK’s largest online automotive marketplace has been shifting through the gears, generating increasing returns for its shareholders while showing no sign of slowing down,” said Mark Crouch, analyst at investment platform eToro.

“Despite the onset of inflation in 2021, causing revenues to stall, the company has since stepped on the gas and revenues per user have rebounded to record highs in each of the following three years. It’s little surprise then that this morning’s full year earnings report is more of the same. Revenues, profits and cash flow have all moved higher.

“Auto Trader has made itself indispensable to buyers and sellers in recent years. With at least 80% of buyers using Auto Trader, this has resulted in franchise retailers, manufacturers and private sellers turning to Auto Trader as a matter of course.

Dr Martens share surged on Thursday as investors chose to look past dismal sales performance and focus on substantial cost cuts.

The group met already subdued guidance which would have pleased investors with low expectations for the full year results.

Although the CEO was fairly upbeat about the earnings report, sales performance would have made horrible reading for investors. Group sales were down 12% as North American sales dived 24% – a region the company says it wants to focus on in 2025.

“Our FY24 results were as expected and reflect continued weak USA consumer demand. This particularly impacted our USA wholesale business and offset our Group DTC performance, where pairs grew by 7%,” said Kenny Wilson, Chief Executive Officer, Dr Martens.

“We are clear that we need to drive demand in the USA to return to growth in FY26 onwards and are executing a detailed plan to achieve this, with refocused and increased USA marketing investment in the year ahead.”

With group sales falling double digits in percentage terms, Dr Martens needed to take a long hard look at their business to figure out how they were going to stop the erosion of the bottom line. 

The easy answer to this conundrum is almost always cost cuts and that’s what the company has decided to do. 

The company has highlighted ‘organisational efficiency’ and ‘operational streamlining’ as methods to reduce costs suggesting some staff members could be facing the boot. 

“The firm has announced a raft of cost cutting measures and it seems they do need to pull themselves up by the bootstraps to get out of this financial quagmire. The new CFO is targeting savings of £20-25 million, news of which is being well received by the market this morning. This morning’s bid however is a drop in the ocean, given that the shares have pretty much been on the decline since the IPO in 2021,” said Adam Vettese, analyst at investment platform eToro.

“Consumers have been under pressure in this higher inflation environment and with their punchy ticket price, a pair of Docs is probably one of the first luxuries to make way. The numbers would back this up.”

The point of care pharmacogenetic testing company Genedrive (LON:GDR) appears to have been successful in it urgently required funding.

On Thursday 9^th May the group announced that it was seeking £6.0m of fresh funds to continue its development work.

Without such funding it warned that it effectively had only a few weeks left of available capital to pay its way ahead.

Sudden Requirement

The sudden requirement for new funds was declared by way of a Firm Placing for £168,000, a Conditional Placing for £1.9m, with the balance needed to be raised through a £2.03m Open Offer and around £1.89m through an Offer by REX, the Peel Hunt platform.

Funding Success

This morning the Manchester-based company stated that it had received a massive support from 94.4% of its shareholders in its Open Offer, which was impressive.

In total some 388.83m new shares will be issued at 1.5p each, to raise net proceeds, after expenses, of around £5.47m.

CEO James Cheek stated that:

“We are delighted with the response from our retail shareholders and other investors to this financing which will enable the Company to further drive market penetration and sales of its MT-RNR1 test and its CYP2C19 test whilst also progressing our U.S. regulatory plans for our MT-RNR1 test. 

Nearer term we await NICE’s final decision on the recommendation for our CYP2C19 test which is due on 10 July 2024 and we are very encouraged by the ongoing performance of this test in the DEVOTE programme as announced by the Company on 21 May.”  

Before the market opened this morning the shares were standing at 1.75p.

Tekcapital portfolio company Innovative Eyewear has announced the launch of Eddie Bauer Smart Eyewear in four distinct styles – all enabled with ChatGPT.

The launch of the Eddie Bauer range follows the release of Nautica-branded smart eyewear at the beginning of the year. Innovative Eyewear is also working on Reebok-branded smart eyewear, which is expected to hit the shops later in 2024.

The launch of Eddie Bauer Smart Eyewear shouldn’t have come as a surprise to investors after Tekcapital announced Innovative Eyewear would launch the range this year, but take nothing away from the market reaction, which sent Innovative Eyewear shares over 140% higher at one point in US trade on Wednesday.

Innovative Eyewear recently announced sharp increases in Q4 2023 and Q1 2024 revenues, and the launch of the Eddie Bauer range has the potential to power a step change in revenue generation for the company.

“We believe the launch of our Eddie Bauer Smart Eyewear line marks a significant milestone in our mission to push the boundaries of eyewear innovation,” said Harrison Gross, CEO of Innovative Eyewear.

“By introducing the first-ever rimless smart eyewear, we believe we are not only elevating style but also redefining the possibilities of wearable technology. This collection exemplifies our commitment to merging fashion and function, catering to the modern, adventurous lifestyle that Eddie Bauer embodies. We believe this is our most premium product to-date, with a combination of high-end finishes, tried and true frame contours and powerful tech accessories to deliver a smartglass experience like no other.”

Eddie Bauer is part of the Authentic Brands group, which owns leading brands, including Billabong, David Beckham, Reebok, Ted Baker, Quicksilver, Rockport, and Hunter.

“We are pleased to introduce Eddie Bauer’s next adventure in innovation to its audience of brand fans,” said Sierra McPhillips, Vice President of Brand at Authentic.

“Innovation is at the core of Eddie Bauer’s brand values, and we are thrilled to continue that mission through the Smart Eyewear launch, in partnership with Innovative Eyewear.”

The FTSE 100 was down again on Wednesday as nerves around the election and inflation started to creep into equities, and the FTSE’s record-breaking run became a distant memory.

Just a few weeks ago, the FTSE 100 was breaking to fresh record highs on a near daily basis, but the reintroduction of interest rate concerns and the upcoming general election have dampened much of the enthusiasm.

The FTSE 100 was down 0.5% to 8,203 and levels not seen since the start of March.

Weakness was largely confined to the UK on Wednesday after the NASDAQ hit another record high overnight helped by surging AI-focused stocks.

“Financial markets are fracturing in terms of sentiment, with AI exuberance continuing to power mighty tech while worries about high interest rates lingering keep investors cautious elsewhere,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The FTSE 100 has opened on the back foot, as stubborn inflation remains in focus and the General Election campaign continues to throw up economic and corporate uncertainty.”

At the time of writing on Wednesday, few gainers were present, with most industry sectors in the red. BP and Shell were slightly higher amid rising oil prices, but their gains were not enough to offset weakness elsewhere. Only 16 of the FTSE 100’s constituents were trading higher.

“The weakness for the UK’s flagship equity index came despite higher oil prices lifting BP and Shell amid speculation OPEC will maintain supply cuts at its meeting on 2 June. Consumer goods companies, miners and financials acted as a drag on the UK market,” said AJ Bell investment analyst Dan Coatsworth.

Ocado, down 5%, was the top faller, as it retraced some of yesterday’s surprise gains.

Many investors will be watching tomorrow’s US PCE data and gaining insight into the trajectory of inflation as a potential catalyst for stocks.

Nvidia shares hit fresh record highs overnight as investors continued to position for greater AI adoption.

There have been periods in 2024 when investors would have been forgiven for thinking the hype around AI was starting to fade. We have seen big sell-offs as people question the valuations of the ‘Magnificent 7’ technology stocks at the forefront of AI innovation.

However, these sell-offs have consistently been bought into by investors prepared to take the long view on AI and ride out any gyrations in the companies with Generative AI running through their veins.

Indeed, Nvidia’s 7% rally overnight, which took the stock to fresh record highs, demonstrates investor willingness to disregard current valuations and focus on their view of a world with AI deeply integrated into everyday life.

Should we reach such a point – and the smart money says we will – chip makers like Nvidia are going to be among the big winners. Strong results released last week shows the AI boom in much more than the latest hot topic for the media to jump on. Far from that, Nvidia is producing extraordinary revenue growth primarily on soaring demand from AI applications.

Dan Coatsworth, investment analyst at AJ Bell, explains, “The stock has been bid up to a new record high potentially because the latest messages from the company contain all the right notes that investors want to hear. The business is doing incredibly well, there are so many opportunities to keep growing, and the AI theme still has legs. When the song is that catchy, investors want to keep humming it all day long.”

Nvidia’s journey from a computer games graphics card maker to an Artificial Intelligence behemoth could well still be in its infancy.  

“As we are still believed to be in the early stages of the adoption of artificial intelligence, enthusiasm about the potential ahead is helping maintain the AI rally, even though the trajectory of demand for the technologies is hard to map,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

IDS shares bounced on Wednesday after the Royal Mail owner announced it had agreed a takeover deal worth up to 370p to shareholders.

After fairly smooth negotiations with a group controlled by a Czech billionaire, the IDS owners have agreed on 360p in cash and up to 10p in dividends to eligible shareholders. The group had previously offered 320p, which was rejected by the IDS board. 

Many will argue that the offer fundamentally undervalued the business’s future potential, but given the IDS share price’s recent performance, it’s easy to see why the deal has been agreed upon. 

IDS has had a rollercoaster ride as a public company. Royal Mail listed at 330p and was met with strong investor demand, leading to periods above 500p. However, regulatory pressures, falling volumes, competition, and strike action have consistently dogged the company, and shares hugged the 200p mark for months on end.

While investors are cheering the news on Wednesday, sending IDS shares 3.3% higher, the deal is far from done with the government having the final say in whether it goes ahead.

“The first hurdle has been cleared in Daniel Kretinsky’s attempts to buy the owner of Royal Mail. The price has been agreed and recommended by the board, now comes the hard part in getting the government to approve the deal,” said Dan Coatsworth, analyst at AJ Bell.

“The big question is which political party is going to be in power to decide, given the general election is only five weeks away. Takeovers often take ages to complete, meaning there is a high chance that Labour will be the one to decide, judging by the latest polls.

“Chancellor Jeremy Hunt has suggested the takeover would not be opposed in principle, but his view might soon be irrelevant. Meanwhile shadow business secretary Jonathan Reynolds welcomed assurances that the proposed new owner of Royal Mail will respect the company’s history and tradition and offered a series of undertakings so as not to rock the boat with the UK operations. Labour says it would take the necessary steps to ‘safeguard its undeniable identity and place in public life’.”

If the deal goes ahead, it will be another lowly-valued UK company snapped up by overseas investors and taken private.