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Andrew Gillham, of Team Asset Management, offers this week’s review of activity in the global markets
NVIDIA Corp became the world’s most valuable company last week, eclipsing $3-trillion-club members Microsoft and Apple.
The 700% surge in the share price of the AI-focused chipmaker since ChatGPT was launched on 30 November 2022 has been extraordinary and has pulled in more speculative investments recently, including leveraged tracker funds.
However, Nvidia’s time spent at the top was brief, and a 13% fall of its share price over the past three days has wiped $430 billion off its market valuation, the largest loss for any company over a three-day period in history.
The correction weighed on other chipmakers and dragged the technology-focused Nasdaq down 2% over the week, underperforming all other major indices.
Closer to home, shares in the UK soft-drink manufacturer Britvic jumped more than 7% on Friday, and again on Monday, after it revealed that it had rejected two unsolicited bids from Carlsberg, the latest of £3.1 billion, or £12.50 per share, a price that management said “significantly” undervalued the company.
Acquiring Britvic would give the Danish brewer a more diversified portfolio of products at a time when beer consumption is in decline, with many drinkers switching to spirits or reducing alcohol consumption.
In addition to producing its own brands, including Robinsons and J2O, Britvic is also the bottler for PepsiCo in the UK.
In contrast, shares in another British consumer staples stalwart, Tate & Lyle, fell 9% on Thursday as investors questioned its deal to buy CP Kelco, a producer of speciality ingredients, for $1.8 billion. Tate & Lyle, originally a sugar refiner, also now produces a broad range of sweeteners and fibres and believes that CP Kelco’s technologies will enable it to improve products that have a “massive sugar replacement challenge”.
In economic news, there was a mixed picture on the inflation front ahead of the Bank of England’s interest rate decision last week. Encouragingly, the Office for National Statistics reported that headline annual consumer price inflation had slowed to the BoE’s 2% target rate in May for the first time in nearly three years. However, the core rate, which excludes more volatile items such as food and energy, remains more elevated at 3.5% and services inflation, by far the biggest sector in the UK economy, was 5.7%.
The BoE’s Monetary Policy Committee voted seven to two in favour of keeping the benchmark interest rate unchanged at 5.25%, not a surprise as the general election takes place next week. However, some members on the committee were encouraged by the direction of travel for inflation and suggested they would soon be ready to vote for rate cuts. Money market futures are now pointing to a quarter of a percentage point cut in August, followed by one more before the end of the year.
The Swiss National Bank is in a very different situation, especially with the country’s annual inflation running at just 1.4%. It has, however, been alarmed by the strong appreciation of the Swiss franc in the wake of President Macron calling a snap election in France, which has triggered some turmoil across European markets and pushed investors towards haven assets.
In a bid to stem and reverse some of the appreciation, the SNB cut its deposit rate at a second consecutive meeting on Thursday and chair Thomas Jordan asserted that the bank was “willing to be active in the foreign exchange market”. The SNB has a long history of using unconventional monetary policy tools, such as currency intervention, to achieve price stability.
In commodity markets, brent crude moved back above $86 a barrel for the first time since April as tensions between Israel and Iran-backed Hezbollah escalated, threatening more instability in the Middle East region. Hezbollah’s leader, Hassan Nasrallah, also warned Cyprus that it would become a target if Israel used its infrastructure in any attacks.
