With Wall Street closed for Presidents’ Day, other markets turned to introspection following what has been an eventful year so far.
For the moment, US investors have brushed aside any technology threat from Asia, but investors in China are reading the runes rather differently.
The tech sectors in Hong Kong and China have risen strongly this year, with the Hang Seng Index for example already having added 20% after taking heart from the DeepSeek developments. While it seems increasingly unlikely that this will pose the existential threat which was initially feared, the fact that there may be others to follow, and that Chinese firms are displaying some ability to develop and deliver lower-cost versions of the existing US kingpins has boosted optimism.
At the same time, a rare meeting between the Chinese President and the country’s top business leaders was read as a sign that Beijing was at last considering abolishing its crackdown on both the tech and private sectors. Quite apart from the fact that the reciprocal tariffs between China and US are not for the moment as severe as some had expected, it also provides some solace to an economy which has been plagued by a weak property sector, high youth unemployment and tepid consumer demand over the last year.
In the UK, where any developing AI battles are of less direct significance, investors turned to the latest signal on the ailing domestic economy. The unemployment rate for the last quarter remained unchanged at 4.4%, as compared to estimates of a rise to 4.5%, although less positively wage growth continued to outpace inflation, which will further muddy the waters ahead of the Bank of England’s next interest rate decision.
The report suggests that some strength in the economy remains, although recent growth numbers have been marginal at best. The impacts of the measures announced in the Budget, which could lead to job reductions and at the very least to companies passing on price rises to consumers, have yet to fully wash through, which has darkened the immediate economic outlook.
Fortunately for investors, the UK economy is not the UK market and the FTSE100 in particular is currently reaping the benefits of both its global exposure as well as its reputation as something of a haven investment destination. Another cautiously positive open was achieved despite a 4% decline in the BT (LON:BT) share price following a broker downgrade, which read across to Airtel Africa (LON:AAF). There was also a fall in the price of InterContinental Hotels (LON:IHG) after its full-year numbers, which saw a drop of 11% in pre-tax profit from the previous year, although the news was softened by the announcement of a $900 million share buyback.
There was also some strength in banking shares, which comes ahead of the reporting season being rounded off this week as HSBC (LON:HSBA), Lloyds Banking (LON:LLOY) and Standard Chartered (LON:STAN) present annual results.
The story so far for Barclays (LON:BARC) and NatWest (LON:NWG) has been one of strong results but a muted market reaction, partly in response to both shares having doubled over the last year and therefore being subject to higher expectations.
Gains in the share prices at the three remaining banks have also been notable over the last year, with HSBC having added 38%, Lloyds 46% and Standard 89%, thus making them susceptible to a similar reception.
For the index as a whole, a nudge ahead at the open has left the FTSE100 ahead by 7.4% in the year to date, having continuously tested record highs along the way over the last month.