Markets wobble as investors and Rishi Sunak are faced with a sea of red

“Investors and Rishi Sunak were treated with a sea of red that’s sweeping the country in more ways than one. The prime minister’s announcement of a summer general election has done little to alleviate market disappointment at this morning’s inflation figure coming in hotter than expected,” says Dan Coatsworth, investment analyst at AJ Bell.

“Sunak’s attempts to talk up the numbers fell on deaf ears as today’s figure has effectively kicked the can down the road for the Bank of England to cut UK rates any time soon.

“Rishi Sunak declared inflation to be ‘back to normal’ and hammered home the message that ‘brighter days are ahead’ but investors focused on the 2.3% figure coming in higher than forecasts of 2.1%. That might seem like clutching at straws, but every tiny difference matters, especially when the Bank of England pays so much attention to every data point when deciding on monetary policy.

“Inflation heading towards the Bank’s 2% target and the country coming out of recession are central to Rishi Sunak’s election campaign, but the key question is whether this is enough to win votes in the fight against Labour, which is becoming a tougher battle by the day.

“Adding to today’s drama is the fact investors were waiting nervously for the Federal Reserve’s meeting minutes to spot any more clues for when rates might be cut in the US.

“US markets struggled to find direction but it was noteworthy that AI chips giant Nvidia dipped in early trading, ahead of its quarterly results after the market close. Expectations have been high for the stock but investors clearly don’t want to go all-in just in case it disappoints.”

PDD Holdings (TEMU)

“PDD, the owner of the fast-growing Temu e-commerce platform, stunned the market with its latest quarterly results where earnings came in more than twice as high as forecast. The consensus was RMB10.35 per share and PDD delivered RMB20.72 per share.

“Parents have lambasted Temu for being a hive of plastic tat which children are desperate to own. It is a platform for merchants to sell a variety of cheap items, utilising spare capacity or excess product in Chinese factories. Clever marketing combined with in-depth analysis of shopping trends means that Temu has been able to focus on products it is confident will sell, hence why its platform is not the graveyard for unwanted goods that some might believe it to be.

“Temu doesn’t make the products, instead it leans on third parties to supply its platform. It scoops up fees linked to fulfilment, payment processing and more – an asset-light business model that is proving to be a golden goose for PDD.

“The company has hit upon a lucrative way to make money and analysts are universally bullish on the stock. PDD is in the very unusual situation of not having a single ‘sell’ rating on its shares and there is only one ‘hold’ rating. That compares with 44 ‘buy’ or ‘strong buy’ ratings.

“For all of its nuisance marketing tactics on social media, Temu is clearly seen as a major disruptive force in global e-commerce and it is certainly the talk of the town.”

Target

“Clean up on aisle six – investors have been sick at the weak sales and profit guidance from Target. A first quarter earnings miss and gloomy commentary on second quarter prospects left the general merchandise seller as the biggest faller on the S&P 500.

“The company is cutting prices on thousands of core products to lure in customers after seeing people make fewer trips to its stores. 

“Target’s woes underpin growing concerns that the US consumer is buckling under the pressure of high interest rates, having run down savings amassed during the pandemic and now increasingly relying on credit to fund purchases.”

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