FTSE 100 extends recent weakness
The FTSE 100 slipped lower as UK stocks continued their recent decline, extending weakness that has persisted over recent trading sessions. The index’s performance lagged behind European peers as sentiment improved across continental markets.
UK firms in healthcare and utilities sectors missed out on broader European gains, highlighting the index’s sector composition challenges. The FTSE 250 also declined, reflecting the broader weakness across UK equity markets during the session.
British government bonds outperformed peers, with gilt yields falling more than three basis points across the curve. This bond market strength suggested investors were seeking safer assets amid concerns about UK corporate earnings and economic outlook.
The British pound maintained relative stability around $1.35, showing resilience despite ongoing economic uncertainties. However, currency stability has not been sufficient to attract meaningful international investment flows into UK equity markets.
Mixed morning for company earnings
PPHE Hotel Group plunged as much as 12%, marking its largest decline in over four years after reporting cost increases and delays to new hotel openings. The company operates the Radisson brand across Europe and highlighted rising wage and social security costs.
Power generation firm Drax tumbled 8% following news of a Financial Conduct Authority investigation into historical biomass sourcing statements. The probe covers the period from January 2022 to March 2024, including compliance of annual reports from 2021 to 2023.
S&P 500 extends rally to record territory
The S&P 500 closed at a fresh record high of 6,481.40, marking a 0.24% gain that surpassed its previous August 14 peak. This achievement comes as investors continue to show confidence in US equity markets despite mounting uncertainties.
The Dow Jones Industrial Average also participated in the rally, advancing 0.32% as blue-chip stocks found favour amongst traders. Meanwhile, the technology-heavy Nasdaq 100 Composite managed a 0.21% gain, demonstrating resilience despite weakness in key semiconductor names.
This latest milestone extends the S&P 500’s impressive run, with the index continuing to benefit from robust corporate profits and improving economic sentiment. The contrast with UK market performance illustrates regional differences in investor appetite.
Nvidia results highlight China risk concerns
Nvidia’s shares slipped 3.2% in after-hours trading despite reporting quarterly revenue of $41 billion in data centre sales. The chipmaker’s forecast of $54 billion in Q3 revenue slightly exceeded analyst expectations but came with significant caveats.
The company’s guidance notably excludes any potential sales to China, despite holding licences to sell H20 chips to the region. Management warned that geopolitical tensions remain a key risk factor for future performance and growth prospects.
This cautious approach reflects the ongoing uncertainty surrounding US-China trade relations and their impact on the semiconductor sector. Nvidia’s conservative stance suggests companies are preparing for potential restrictions or policy changes affecting international markets.
European markets outpace struggling UK performance
European bourses showed significantly stronger performance than the declining FTSE 100, with the automotive sector leading gains across the continent. Reports showing European car sales rising the most in 15 months during July boosted sentiment towards manufacturers.
France’s CAC 40 and Germany’s DAX 40 benefited substantially from exposure to major European automakers, sectors that the FTSE 100 notably lacks. This highlighted how sector composition disadvantages can impact relative index performance during thematic rallies.
The automotive strength came as consumers showed resilience in purchasing fully electric and hybrid models, suggesting continued momentum in the energy transition. UK luxury automaker Aston Martin was among the few bright spots, performing well on the FTSE 250 midcap index.
AI infrastructure demand remains robust despite concerns
Despite Nvidia’s cautious China outlook, the company highlighted continued strength in artificial intelligence (AI) infrastructure spending across global markets. Data centre revenue reached $41 billion, driven primarily by cloud service providers expanding their AI computing capabilities.
The company expects $20 billion from “sovereign AI” initiatives as governments invest in domestic capabilities. This figure demonstrates sustained appetite for advanced semiconductor solutions despite broader economic uncertainties.
MongoDB’s 38% surge after lifting its profit forecast provided additional evidence of strong demand for AI-related software solutions. The database company’s performance suggests the AI investment cycle extends beyond hardware into supporting infrastructure.