Market snapshot: Nvidia leads tech pause, Britvic bid approach

Technology shares let some air out of the tyres after a recent record run, while there were also further signs of a marginally cooling US economy, which keeps the interest rate cut debate active.

After briefly rising in early trade, those indices with the largest exposure to tech - the S&P 500 and Nasdaq – gave up gains to finish lower. NVIDIA Corp (NASDAQ:NVDA), fast becoming the bellwether of the technology sector, saw its shares decline by 3.5% after having temporarily overtaken Microsoft Corp (NASDAQ:MSFT) earlier in the week as the most valuable listed company.

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Even so, the dip did little to mar the stellar performance of the shares, which have risen by 204% over the last year and by 170% in this year alone. Similarly, the Nasdaq and S&P 500 remain strongly ahead in the year to date despite yesterday’s blip, with rises of 18% and 14.7% respectively.

Elsewhere, economic data implied further signs of a slowing economy. Higher-than-expected weekly jobless claims were released, revealing that the number of people on benefits was at its highest level since January. Meanwhile, housing starts also stuttered as the higher mortgage rate environment is apparently taking a toll on consumers, while a separate report on manufacturing showed growth at a lower rate than had been estimated. 

The combined data means that the rate debate will not subside as investors continue to assess the timing of the initial cut from the Federal Reserve. Indeed, there is currently more attention being paid to what would otherwise be a less significant set of economic releases in an attempt to gain an edge on the likely direction of travel. In the meantime, the more traditional Dow Jones index posted gains, partly driven by its relative lack of exposure to tech, leaving the index ahead by 3.8% so far this year.

On a seasonal basis, volumes are also starting to ease, which can exacerbate volatility and prompt an overshoot of share prices in either direction. As the end of the month and therefore the half-year approaches, attention will turn to the next company reporting season, where the corporate outlook and guidance will have as much of an impact as the results themselves.

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Asian markets were mostly lower, affected by the tech weakness emanating from Wall Street. In addition, there was an inflation reading in Japan showing that prices had ticked higher for the first time in three months, partly stoked by energy bills, prompting speculation on the timing of a further interest rate hike from the Bank of Japan.

Shares in China and Hong Kong came under some tech-related pressure, with the underlying health of the Chinese economy in particular still under close review by the authorities and investors alike.

Investor sentiment was similarly apathetic at the open in the UK, with retailers weighing on the premier index despite the release of retail sales volumes, which were better than expected. Sales grew by 2.9% in May, reversing April’s fall of 1.8%, prompting some hopes that the economy could be turning a corner given the importance of the consumer to growth.

There is also the undercurrent of wage rises which are at last outstripping inflation, although this very factor is part of the reason that the Bank of England considers the situation finely balanced, having left rates unchanged yesterday and prompting fresh speculation on the possibility of an August cut. Even so, there seems to be some warming of investor sentiment more generally towards the UK, with the FTSE 100 having posted gains of 7% so far this year.

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Indeed, in the FTSE 250, Britvic (LSE:BVIC) shares surged by 15% after revealing that it had been the subject of two unsolicited approaches from Carlsberg, both of which it rejected. While there is no guarantee that any takeover will happen, the news is the latest confirmation that there are many overseas companies running the slide rule over UK PLC.

The resultant merger and acquisition activity which has been seen is something of a double-edged sword. On the one hand, it recognises that there are many well-run businesses trading at a discount to their true value and are therefore attractive bid targets. On the other hand, it also reduces the number of companies listed, which is a real current concern for policymakers and which has yet to be addressed.