London’s blue-chips made modest gains Tuesday, supported by defensive sectors, while global sentiment remained cautious amid worries over potential US tariffs on imports.
The FTSE 100 index ended up 30.16 points, 0.4%, at 8,533.87. The FTSE 250 jumped 219.01 points, 1.1%, at 20,588.51, and the AIM All-Share rose 3.93 points, 0.6%, at 715.32.
The Cboe UK 100 ended up 0.4% at 855.97 on Tuesday, the Cboe UK 250 gained 1.1% at 18,011.11, and the Cboe Small Companies rose 0.1% to 16,034.53.
Russ Mould at AJ Bell noted the FTSE 100 ‘continued to be an island of calm’, with investors lapping up its ‘plethora’ of defensive stocks.
‘Utilities and healthcare were in demand, implying that investors were keen to ensure portfolios had some support in case of another tech-related wobble,’ he added.
On Monday, concerns that China’s DeepSeek’s artificial intelligence app could threaten the dominance of the US tech giants sparked carnage with Nvidia dropping 17%. Broadcom and Oracle followed suit, dropping 17% and 14% respectively.
On Tuesday, markets in New York were brighter. The Dow Jones Industrial Average was up 0.1%, the S&P 500 was 0.4% higher, while the Nasdaq Composite rallied 1.0%.
‘The DeepSeek shock has reminded investors they cannot be complacent when trying to play the AI trend. Stocks do not travel in unison and neither do they always travel upwards. Sometimes it‘s good to be reminded of this. Valuations have been getting lofty in the tech space and investors need to appreciate that richly priced stocks can fall hard on the slightest bit of bad news,’ Mould added.
Bank of America sees winners and losers in the technology world from DeepSeek.
‘The exact cost of development and energy consumption of DeepSeek are not fully documented, though...we believe that the implications of lower cost to run AI models is a benefit to the general software group,’ the broker commented.
‘The lower cost to run AI should enable capex scale for Microsoft while easing graphics processing constraints likely a negative for Oracle,’ BofA said in a note to clients.
In European equities on Tuesday, the CAC 40 in Paris ended up 0.1%, while the DAX 40 in Frankfurt advanced 0.7%.
Tariff chat sparked fresh dollar strength. The pound was quoted at $1.2432 late Tuesday afternoon in London, down from $1.2479 at the equities close on Monday.
The euro stood lower at $1.0424, against $1.0505. Against the yen, the dollar was trading higher at JP¥155.63 compared to JP¥154.16.
Donald Trump said Monday that the US will soon place tariffs on foreign-made semiconductor chips, pharmaceuticals and metals such as steel.
Speaking at a Republican congressional retreat in Miami, Trump said the levies could take place in the ‘very near future,’ so as to ‘return production of these essential goods to the US of America.’
‘If you want to stop paying the taxes or the tariffs, you have to build your plant right here in America,’ he added.
Trump was speaking ahead of Wednesday’s interest rate decision by the Federal Reserve.
Last week the US president called on the US central bank to lower rates but he is likely to be disappointed.
The Fed is widely expected to keep the federal funds rate range unchanged at 4.25% to 4.50%.
Data on Tuesday showed US consumer confidence declined in January, with both present and future outlooks deteriorating.
The Conference Board’s Consumer Confidence index dropped by 5.4 points to 104.1 in January, from a revised December reading of 109.5. December’s figure was revised upward by 4.8 points but remained 3.3 points lower than November’s level.
In London, Prime Minister Keir Starmer said the government’s ‘growth mission’ was now the driving force behind policy decisions.
He told business chiefs in the City of London that had been made clear to ‘each of our Cabinet colleagues’.
On Wednesday, Chancellor Rachel Reeves will deliver a major speech setting out plans for growth, expected to include support for expansion of Heathrow airport.
Starmer told business leaders: ‘When you’re answering the question, ’should we do X, or should we do Y’, that is guided by the mission.
‘Should we do X? If it’s good for growth, good for wealth creation the answer is ’yes’, if it’s not then the answer is ’no’.
‘It prioritises and gives a sense of direction to government.’
He added he was ‘hard-wiring growth into all the decisions of the Cabinet’.
On the FTSE 100, Rentokil Initial firmed 0.8% as it kept its outlook unchanged in an unscheduled update on Tuesday, offering a slight lift to shares still beleaguered by a troubling update in September.
In a trading statement, Rentokil said organic revenue growth in the final three months of last year was 3.0%. North America organic revenue growth accelerated to 2.3% on-year in the fourth-quarter from 1.4% in the third.
The pest control and hygiene firm said its group adjusted operating margin, adjusted pretax profit before amortisation and its North America adjusted operating margin were all in line with prior guidance.
Analysts at Stifel took heart from Rentokil’s update.
‘We view this as a robust trading update, and look forward to more details being provided at the prelims,’ Stifel said.
On the FTSE 250 well received trading updates prompted gains for Computacenter, AG Barr and Pets at Home, which rose 6.1%, 6.7% and 5.4% respectively.
Hatfield-based Computacenter gave mixed messages in its update, guiding to profit at the lower end of analyst forecasts alongside a product order backlog ‘significantly ahead’ of 2024.
Cumbernauld-based soft drink and energy drink manufacturer AG Barr said Irn-Bru, Rubicon and Boost had all performed strongly in the financial year ending January 25, with Rubicon the stand-out performer.
In a trading update, AG Barr said annual revenue is expected to be around £420 million, up 5% from £400 million a year prior. This is line with company compiled consensus.
AG Barr said Rubicon achieved another year of double digit revenue growth.
Irn-Bru also delivered strong revenue growth and is now one of the top five carbonates in the UK, the firm said, while Boost gained momentum in the second half with a step up in profitability.
At Cheshire’s Pets At Home, a forecast of ‘modest’ profit growth during its current financial year was enough to put some energy into the share price.
Brent oil was quoted lower at $77.21 a barrel at the time of the equities close in London on Tuesday, down from $77.26 on Monday. Gold firmed to $2,755.79 an ounce against $2,740.66.
Wednesday’s global economic calendar sees Australian inflation figures overnight and interest rates decisions in Canada and the US at 1445 and 1900 GMT respectively.
Wednesday’s local corporate calendar sees a trading update from trading platform AJ Bell.
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