The FTSE 100 has opened down as the US sneeze risks becoming a cold. Asia Pacific equities continued on Monday where indices to the west finished last week. Japanese stocks gave up most of the last year’s gains with the Topix and Nikkei plunging over 7%, closing more than 20% below last month’s record highs. Exporters bore the brunt of the sell-off as contagion from last week’s poor employment and manufacturing data in the States put recessionary fears back on the table. The discussion around September’s rate decision at the Federal Reserve Bank has moved from if to how much, with the odds now moving in favour of a half point cut.
Far Eastern economies remain in focus this week, with the Reserve Bank of Australia due to announce its rate decision tomorrow. It’s certainly a more complex conundrum than it would have been a week ago. Any sign of a slowdown in the global flow of goods and services from Chinese trade numbers could keep markets in skittish form. But there has been a little reassurance today from better-than-expected services activity numbers in China. The Caixin/S&P Global services purchasing managers’ index (PMI) rose for the 19thmonth in a row to 52.1 in July, albeit at a slower pace than in recent months.
US futures suggest markets may fall further before finding a support level. The coming months will be a testing time with economic and political uncertainty weighing on the market, as the US heads towards an increasingly unpredictable election.
Today will see a read on business confidence from various corners of the globe with PMI data due from the UK, the US, Germany and the wider European Union.
Trying to catch a falling knife can end in tears, but its important not to abandon a long-term lens. Time in the market and diversification have been consistently shown to be the bedrock of successful investing strategies. Current conditions will present opportunities to buy shares in quality companies. To mitigate the volatility, it makes sense to feed excess capital into the market slowly, but established companies with dominant market positions have survived and prospered through many cycles. And emerging mega-trends such as artificial intelligence and the potentially enormous healthcare impact of weight-loss drugs haven’t gone away.
But even the most seasoned of investors keep their powder dry sometimes. Warren Buffet’s Berkshire Hathaway sold $76bn of stocks in the second quarter, leaving $277bn of cash on the balance sheet, equivalent to over 60% of London’s FTSE-250 index. Apple’s sales and profit growth was solid, if not spectacular, in the third quarter. The key to unlocking further upside is convincing the company’s fanatical customer base that its entry into the AI race is reason enough to upgrade perfectly good older iPhones.
The AI landscape is changing at a supersonic pace. Rumours have surfaced that NVIDIA’s latest super-chip the Blackwell B200 may see its launch delayed for three months. The stock’s already down nearly 15% this month, and investors will be paying attention to guidance for the next quarter when it reports Q2 numbers later this month. But demand for AI chips is rampant and supply is tight. Even with its existing models NVIDIA can out compete on both power and the ability to fulfil orders. Forecasts that full-year revenue will nearly double to over an eye-watering $120bn for the full year, are unlikely to be derailed much, if at all.
After economic concerns in the US drove the biggest weekly fall since April, Brent Crude prices have fallen further today and now sit just above $76 per barrel.”