Nvidia lifts US markets overnight and FTSE follows their cue, BHP cuts dividend in half, sterling higher on improved UK public finances, Wood Group lifts guidance

Tuesday, August 22, 2023 - 09:54

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“The AI hype train continues to push Nvidia higher ahead of its results on Wednesday and that helped give US stocks a lift overnight, a move which was followed by European stocks on Tuesday morning,” says AJ Bell Investment Director Russ Mould.

“A very high bar is being set for the chipmaker and the disappointment could be amplified if it falls short of heightened expectations.

“The starting gun being fired on the IPO of Nvidia’s peer ARM on Nasdaq, having snubbed London as a listing destination, may help provide further fuel for the momentum behind the artificial intelligence story.

“Another stock which has given the UK market the cold shoulder, BHP, which shifted its primary listing to Australia in 2022, has cut its dividend in half.

“The relatively muted reaction on the part of investors to this news reflects an acceptance that last year was something of a one-off as the invasion of Ukraine led to a short-term bump in commodity prices. Today’s results from BHP reflect a move back to something like reality.

“Sterling caught a bid thanks to news of improved UK public finances – though this looks a case of better than awful rather than cause for celebration or an excuse for a tax cut splurge.”

“After a bid from private equity firm Apollo collapsed earlier this year Wood Group has been under pressure to deliver, and these results go some way towards doing that as it pulls the rabbit of slightly improved full year guidance out of its hat.

“The energy services firm has endured a difficult few years after the 2017 acquisition of Amec Foster Wheeler brought with it a whole deal of problems which the company is still addressing. These continue to act as a drag on cash flow although the situation is starting to improve.

“The main driver of the better first half performance was tight control of costs, no mean feat given how volatile the backdrop has been. Wood Group, which is a big provider of services to North Sea oil and gas firms, has a longer-term challenge of adapting to the energy transition.

“Get it right and there could be big opportunities for the company to help its client base through this process, but it needs to put its legacy problems behind it first.”

These articles are for information purposes only and are not a personal recommendation or advice.

The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.