Fed Holds Rates, UK Mortgage Approvals Rise, Microsoft’s Cloud Outlook Hits Tech Stocks:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.54% on 30 January 2025. Real Estate, Energy & Industrials sector has witnessed a substantial growth 

Macro Update:  Shell reported Q4 profit of $3.66 billion, down from $7.31 billion a year earlier, missing estimates due to lower refining margins and weaker LNG trading. However, the company announced a $3.5 billion share buyback program and a 4% dividend increase, reinforcing its commitment to shareholder returns despite the profit decline. Glencore’s 2024 production of copper fell 6% to 951,600 metric tons, alongside declines in cobalt, zinc, nickel, and thermal coal, aligning with the company’s guidance. The drop in copper output, which is critical for EVs, renewable energy, and data centers, raises concerns about future supply amid growing demand for green technologies. In the UK, finance minister Rachel Reeves may need to adjust fiscal plans in March despite a recent dip in borrowing costs, as uncertainties around interest rates persist. Meanwhile, UK mortgage approvals rose to 66,526 in December, surpassing forecasts and reflecting the highest net mortgage lending growth in over two years, suggesting a potential recovery in the housing market. 

Top Market Movers: Among top gainers on FTSE 100 index, Airtel Africa PLC (LSE: AAF) witnessed a rise of 9.62% followed by EasyJet PLC (LSE: EZJ) which gained around 4.18%. 

Commodity Update: The U.S. dollar gained against the yen on Wednesday following fresh tariff threats from the Trump administration and easing concerns over a low-cost Chinese AI model. In commodities, gold increased by 0.10% to $2,797.90, silver remained at $30.85, while copper dropped by 0.31% to $8,999.50. Brent crude saw a minimal decrease of 0.01%, closing at $77.47 per barrel, as market participants weighed the potential effects of U.S. tariffs on Canadian and Mexican imports. Meanwhile, the focus shifted to upcoming updates on the Federal Reserve's interest rate decisions and U.S. GDP data later in the week. 

Our Stance: The Federal Reserve held interest rates steady, with Chair Jerome Powell emphasizing a cautious approach to rate cuts, citing the need for further clarity on inflation and job market conditions. This decision maintains policy stability amid uncertainty surrounding upcoming Trump administration policies on tariffs, taxes, and immigration, which could impact the broader economy. In the tech sector, Microsoft’s disappointing cloud growth forecast sent its shares down over 5%, raising investor concerns about high AI-related spending, slower-than-expected AI revenue, and competition from cost-effective Chinese AI models. Despite strong overall sales, Azure’s results fell short of expectations, contributing to continued weakness in tech stocks, with Nvidia down 4.1% and Microsoft dropping 1.1%. The broader U.S. stock market closed lower, dragged down by technology stocks, as investors reassess the long-term profitability of AI investments in the face of rising global competition. 

FTSE 100 

The FTSE 100 closed at 8,557.81 on Wednesday, rising 0.28% and forming a bullish candlestick pattern. The index remains above the 21-period Simple Moving Average (SMA), indicating a positive short-term outlook. With the 50-period SMA providing strong support, the upward momentum is expected to continue. The Relative Strength Index (RSI) stands at 67.96, signaling strong bullish momentum without reaching overbought levels, suggesting room for further buying pressure. These technical factors point to continued growth, making the FTSE 100 an attractive prospect for short-term investors. On the weekly chart, the FTSE 100 held steady, closing at 8,502.35, a slight 0.03% decline. It remains well above the 50-period SMA, currently at 8,167.15, and key support lies at 7,932. Resistance is seen at 8,400, and a break above this level could signal stronger bullish momentum, potentially eyeing the next resistance at 8,700. On the other hand, a move below 8,020 could raise concerns of further downside risk. Investors should focus on these levels to gauge the index’s potential price action in the coming weeks. 

Data Source - Refinitiv