Must read: FTSE 100, UK GDP, China rebound, ARM IPO, UK petrol prices

GLOBAL MARKETS

After two straight weeks of gains for the FTSE 100, the blue-chip index is rallying again, surpassing key resistance at 7,500. China sensitive stocks like Glencore (LSE:GLEN), Rio Tinto Registered Shares (LSE:RIO), Prudential (LSE:PRU), and Anglo American (LSE:AAL) are trading near the top of the FTSE 100 following gains overnight in Asia.

The Hang Seng rallied sharply after China reduced borrowing requirements for homebuyers in a bid to shore up its embattled real estate sector. Chinese property developer Country Garden shares surged after its creditors agreed to restructure some of its overdue debts, helping the business to avoid a default.

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UK Chancellor Jeremy Hunt said inflation is expected to halve this year. While it is still the highest among the G7 at 6.8%, inflation has been retreating from October’s 41-year high at 11.1%. Meanwhile, the UK enjoyed some positive upgrades to its official economic growth figures – the UK economy was 0.6% larger in Q4 2021 versus the same period in 2019, a major upward revision from prior estimates that the economy was 1.2% smaller. That means the economy enjoyed a much faster recovery out of the pandemic than previously believed.

ARM 

According to Reuters’ sources, ARM Holdings is expected to ask investors to pay between $47 and $51 per share as its IPO roadshow begins this week. This would value the chipmaker at around $50 billion to $54 billion, raising around $5 billion to $5.4 billion, which is less than the $10 billion it was previously seeking. 

It has been a difficult year so far for IPO activity. Rising interest rates, high inflation, the war in Ukraine and an uncertain outlook for financial markets have deterred dealmaking, with fewer flotations in 2023 versus prior years when interest rates were at rock bottom. Last year’s tech sell-off and the mid-sized banking crisis in the US earlier this year have also sparked nervousness towards potential M&A and IPO activity. 

However, ARM is expected to be the biggest public offering of 2023, with this year’s hysteria around artificial intelligence (AI) driving excitement towards its semiconductor components. It has been trying to position itself away from the smartphone market and shift towards AI instead, eyeing up NVIDIA Corp (NASDAQ:NVDA)’s meteoric share price surge as motivation. ARM already has backing from some major clients/investors such as Apple Inc (NASDAQ:AAPL), Nvidia and Alphabet Inc Class A (NASDAQ:GOOGL). 

SoftBank’s decision to list in New York over London has been a kick in the teeth for Rishi Sunak’s government which has been desperately trying to revitalise London as a key global financial hub post Brexit. But the allure of New York as a key destination for listings is clear – it offers attractive valuations and high trading volumes, meaning more liquidity and lower spreads, all draws for traders and investors as well as public companies. The FTSE 100 has been criticised for being the ‘Jurassic Park’ stock market index because of a shortage of businesses in new industries such as AI, fintech and renewable energy. 

UK PETROL PRICES 

According to the RAC, a litre of petrol rose by 7p in August on average, the fifth highest monthly rise in 23 years while diesel rose by 8p, the sixth highest increase. 

This was driven by oil’s recent rally – West Texas Intermediate (WTI) hit the highest level since November this morning following last week’s gain of over 7%. The bullishness has been driven by constrained supply which has outweighed concerns about weaker demand amid the lacklustre global growth backdrop and particular weakness in the Chinese economy. Russia announced plans to cut its oil exports last week while Saudi Arabia is expected to extend its voluntary output cuts in October. 

Rising petrol prices add to cost-of-living pressures and could make it more challenging to bring inflation under control. Supermarket fuel retailers have been criticised of ‘profiteering’ from the volatile market backdrop by allegedly raising pump prices swiftly when wholesale markets rise, yet not cutting consumer prices as quickly when underlying energy prices retreat. In response Asda, for example, announced plans to display its daily fuel prices online to boost transparency.