FTSE higher after US rally, miners up on hopes for China stimulus, new chair at Tesco, JD Sports signs Middle East agreement and Tesla’s price cuts lead to delivery boost

“The markets built on last week’s strong finish to start the second half of the year in decent fettle,” says AJ Bell Investment Director Russ Mould.

“Asian stocks took their cue from Friday’s rally on Wall Street, prompted by data showing core inflation in the US is easing, perhaps reducing the need for too many more rate hikes across the Atlantic.

“There is also improved sentiment towards the Chinese economy, reflected in strong gains for miners on the FTSE 100 on Monday. Now some of the disappointment about a slower than expected post-Covid recovery has eased, the focus is turning to potential financial stimulus and support which could have positive implications for metals and energy demand.

“A busy week of announcements kicks off later today with US manufacturing PMI data – a solid number could convince investors the Fed is on its way to engineering a soft landing, having brought down inflation without doing too much damage to the economy. Jobs numbers on Friday could either undermine or reinforce this view.

“A record streak of four quarterly losses for oil prices may be in the minds of producers’ cartel OPEC when it meets for a seminar in Vienna this week.

“Irish businessman Gerry Murphy looks a solid appointment to the vacant chair’s seat at Tesco after the departure of John Allan amid allegations of inappropriate behaviour.

“Murphy has held senior positions at several high-profile consumer-facing businesses and should ensure the company remains on the steady course it has pursued for several years.

“JD Sports may only be dipping its toes in a potential franchise model for now but the announcement of an agreement with Dubai’s GMG to open 50 stores in the Middle East points to an interesting avenue for the business. This looks a lower-risk way for JD to expand into new markets without expending too much capital.”

Tesla

“Basking in the sun from its first mover advantage with premium electric vehicles to suddenly slashing prices to shift more volumes is quite the U-turn in strategy for Tesla.

“In reality, it had no option but to make its products more affordable if it wanted to keep its crown in the EV space.

“Competition is heating up and there is nothing overtly special about a Tesla compared with other vehicles, apart from the brand accolade. Owning a Tesla is likely to give someone kudos points among friends and family as the brand is still aspirational rather than a reality for most people.

“Delivering a record number of vehicles in the three months to the end of June shows that Tesla’s decision to cut prices has paid off, if you’re judging the business by how many cars sit on people’s drives.

“However, fast forward five years and it seems unlikely that Tesla will have the biggest selling electric vehicle unless it radically slashes prices further. Electric vehicles need to be much more affordable if they are to become mass market quickly.

“Chinese group BYD is already offering much cheaper EVs and has ambitious plans to grow in many parts of the world, although this does not currently include North America, perhaps not a surprise given the ongoing tensions between China and the US.”

These articles are for information purposes only and are not a personal recommendation or advice.