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London open: Stocks gain; Rentokil surges on update
London stocks rose in early trade on Tuesday, having avoided the broader selloff seen in markets a day earlier.
At 0850 GMT, the FTSE 100 was up 0.3% at 8,531.31.
On Monday, the Dow and the S&P 500 closed down 3.1% and 1.5%, respectively, led by a selloff in the tech sector amid concerns about Chinese AI app DeepSeek.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “The FTSE 100 looks set to up a small gain this morning after holding its head above water yesterday amidst a sea of red for tech stocks around the world.
“Defensive sectors had the best of it including non-cyclical consumer stocks such as Unilever and British American Tobacco, as well as the bigger pharmaceutical names. The same sectors were also in the green across the Atlantic, meaning those portfolios with broader exposure are likely to have smoothed out the market’s most recent gyrations.
“Companies in the semiconductor industry have borne the brunt of the sell-off as the emergence of a new AI model from Chinese startup DeepSeek, reportedly developed on a shoestring budget of under $6m, raised concerns about the outlook for spending on cloud infrastructure. The authenticity of this figure has been widely contested.
“Nonetheless, Wall Street’s darling Nvidia has lost its briefly held crown as the world’s most valuable company, diving 17% and losing $600bn of market value along the way, the biggest ever loss for a stock in a single day.
“Other big semiconductor names caught in the crossfire include custom chip designer Broadcom and memory specialist Micron. Outside of the US, stocks that have taken a hit range from Taiwan Semiconductor Manufacturing Company through to the Dutch builder of chip printing machines ASML.”
On home shores, investors were mulling the latest data from the British Retail Consortium, which showed that prices at tills decreased in January as retailers offered “deep discounts” on things like furniture and fashion.
Still, upcoming increases to labour-market bills could reignite inflationary pressures in the spring.
According to the BRC-NeilsenIQ shop price index for January, shop prices fell 0.4% month-on-month following a flat reading in December.
While food prices rose 0.5%, up from 0.1% the month before, non-food prices reduced by 0.9% after a 0.1% decline previously.
This meant that shop prices were 0.7% lower than they were in January 2024, following a 1.0% year-on-year fall in December.
The annual rate of food inflation, in particular, eased to 1.6% from 1.8%, coming in at its lowest rate since November 2021.
“Extensive January sales was good news for bargain hunters, with non-food products showing significant discounts, particularly for furniture and fashion, but less good news for retailers needing to shift excess stock,” said the BRC’s chief executive Helen Dickinson.
“Price cuts and deflation may not last much longer as retailers will soon feel the full impact of £7bn of new costs announced at the last Budget. Higher employer NICs, increased National Living Wage, and a new packaging levy mean that prices are expected to rise across the board,” she said.
In equity markets, Rentokil Initial was the top gainer on the FTSE 100 as the pest control firm said it expects to meet expectations with its 2024 results, helped by a pick-up in organic growth in North America.
SSP Group was also in the black as the travel food outlet operator held annual guidance after like-for-like sales grew 6% in the first quarter driven by continued structural growth across the travel industry around the world.
Computacenter rose as it hailed a record second-half performance but also said pre-tax profit for 2024 was set to be at the low end of the range of analysts’ forecasts.
Irn-Bru maker AG Barr was also higher after a well-received trading update.
Pets at Home was up as it backed its full-year guidance but reported a dip in third-quarter revenue as it pointed to a softer performance from its retail business.
Outside the FTSE 350, Halfords surged as it lifted its full-year profits expectations.
On the downside, industrial and electrical products distributor RS Group slumped as it said full-year profit would be at the bottom end of guidance after third-quarter revenues fell 3% due to declining output and falling business confidence among European customers.
SThree fell as the recruiter said that the challenging economic conditions, impacting new business activity, are expected to persist throughout FY25.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rentokil Initial Plc | +4.24% | +16.40 | 403.30 |
| 2 |  |
Spirax Group Plc | +2.54% | +195.00 | 7,870.00 |
| 3 |  |
Halma Plc | +2.54% | +72.00 | 2,911.00 |
| 4 |  |
Associated British Foods Plc | +2.22% | +41.50 | 1,911.00 |
| 5 |  |
Centrica Plc | +2.12% | +2.80 | 135.00 |
| 6 |  |
National Grid Plc | +2.10% | +20.20 | 981.40 |
| 7 |  |
Ferguson Enterprises Inc. | +2.08% | +300.00 | 14,750.00 |
| 8 |  |
Sainsbury (j) Plc | +1.97% | +5.00 | 259.40 |
| 9 |  |
Tesco Plc | +1.76% | +6.40 | 370.10 |
| 10 |  |
Barratt Redrow Plc | +1.74% | +7.60 | 444.40 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
South32 Limited | -2.47% | -4.30 | 169.70 |
| 2 |  |
Smiths Group Plc | -1.86% | -35.00 | 1,848.00 |
| 3 |  |
Smurfit Westrock Plc | -1.71% | -76.00 | 4,357.00 |
| 4 |  |
International Consolidated Airlines Group S.a. | -1.18% | -3.80 | 319.00 |
| 5 |  |
Melrose Industries Plc | -1.11% | -6.60 | 589.80 |
| 6 |  |
Rolls-royce | -1.02% | -6.00 | 583.80 |
| 7 |  |
Standard Chartered Plc | -0.94% | -10.00 | 1,056.00 |
| 8 |  |
Glencore Plc | -0.86% | -3.10 | 358.40 |
| 9 |  |
Anglo American Plc | -0.63% | -15.00 | 2,363.00 |
| 10 |  |
Hsbc Holdings Plc | -0.55% | -4.50 | 820.00 |
US close: Nasdaq drops 3% as AI stocks hammered by DeepSeek news
A sell-off in the tech sector drove the S&P 500 and Nasdaq firmly into the red on Monday, as concerns about a bubble in the US artificial intelligence industry hammered market sentiment.
The S&P 500 dropped 1.5% to 6,012.28, falling for the second straight day after settling at a new record closing high of 6,118.71 last Thursday. The tech-heavy Nasdaq tanked 3.1% to 19,341.83, with heavyweight Nvidia plummeting 17%.
Meanwhile, the Dow gained 0.7% to 44,713.58 – its highest close since 5 December – with economic bellwethers and consumer-facing stocks benefitting from a rout in the high-growth tech sector.
News that Chinese startup DeepSeek had launched a free AI assistant it claims uses lower-cost chips and less data weighed heavily on share prices in the US-listed tech sector.
DeepSeek’s open-source AI model was reportedly comparable with those of OpenAI, Google and Meta despite the company spending just $6m on its base model, compared with the hundreds of millions (if not billions) of dollars that the US firms have shelled out.
“For the past couple of years AI has been seen as the magic sauce that’s seduced investors into accepting higher valuations for companies that are at the same time investing more and more capital into the pursuit of tech dominance. Whilst supercharged spending delivers supercharged growth that’s all well and good, until something comes along and undercuts the big boys,” said Danni Hewson, head of financial analysis at AJ Bell.
“With the poster child of AI chip companies, Nvidia, sinking to a near four-month low, this manic Monday has hit hard, coming off the back of a Trump infused rally,” Hewson said.
On the macro front, the Chicago Federal Reserve’s national activity index increased to 0.15 in December, the highest reading in seven months, up from November’s upwardly revised reading of -0.01.
Elsewhere, US new home sales rose by 3.6% month-on-month to a seasonally adjusted rate of 698,000 in December, according to the Census Bureau, the biggest increase since September and firmly above market expectations for a reading of 670,000.
Later in the week, the Federal Open Markets Committee will hold its first two-day policy meeting of 2025 on Tuesday, with the central bank set to make its interest rate decision on Wednesday. Economists expect the Fed to leave interest rates unchanged.
Nvidia leads AI stocks lower
Chip stocks were by far the worst performers of the day, with AI darlings Nvidia and Broadcom tanking 17% and AMD dropping 6%.
Tesla was also 2% lower, ahead of a fourth-quarter earnings report on Wednesday evening. The electric carmaker was making headlines on Monday after its Shanghai division sued the European Commission on the back of sky-high tariffs placed on China-made EVs.
It’s set to be a busy few days for the sector, with the likes of Meta, Microsoft and Apple all scheduled to report results before the week is out. Meta and Apple rose, while Microsoft fell.
Meanwhile, cyclical, household names and economic bellwethers performed well, including Johnson & Johnson, Procter & Gamble, Coca-Cola, Nike, McDonald’s and Walmart.
AT&T was a standout performer, rising 6% after reporting strong fourth-quarter results that beat market consensus, and predicting further growth in revenues and profits this year.
Tuesday newspaper round-up: Amazon, Nvidia, Harland & Wolff
The UK has given more than £12.5bn from energy bills to fossil fuel power plants in the past decade through a government scheme to keep the lights on during winter, according to new analysis. The research found that, since 2015, the government has offered contracts worth £20bn through a “capacity market” to create a backup reserve of generators on standby, of which about 60% were fossil fuel power plants and a quarter were energy storage and power cable projects. – Guardian
Amazon is seeking permission to launch drones from its warehouse in Darlington, County Durham, in the latest step towards using the devices to deliver packages to homes. The technology company is to hold a public meeting with local people next week as it seeks permission from the Civil Aviation Authority (CAA) to use the airspace around its warehouse on the edge of the town, in the north-east of England. – Guardian
US chipmaker Nvidia has suffered the largest stock market slump in history after the emergence of an advanced Chinese artificial intelligence (AI) model raised doubts about its technology. Nvidia, the world’s most valuable company, plunged as much as 18pc during trading on Wall Street on Monday, wiping more than $600bn (£480bn) off its valuation. – Telegraph
The takeover of Harland & Wolff by the Spanish state-owned shipbuilder Navantia has been completed in a deal expected to secure more than 1,000 British jobs. Navantia said the sale of Harland & Wolff will allow the company’s four shipyards to support “both a highly skilled workforce and robust supply chain”. – The Times
Stock picker Terry Smith’s £2 billion vehicle, Smithson Investment Trust, has been targeted by Saba Capital, the activist New York hedge fund making waves with its siege of seven UK investment trusts. Filings by Saba-managed Saba Capital Income and Opportunities Fund II reveal it had bought total return swaps giving it an economic interest of £7.4 million in Smithson as at October 31 and disclosed on January 6. – The Times
