FTSE 100 higher as investors bet on near-term UK rate cut, Nvidia keeps flying and Ocado hits seven-year low on Canadian setback

“The FTSE 100 perked up after the Bank of England’s decision to leave UK interest rates untouched. A weaker pound was good for the index’s large number of overseas earners. UK 10-year gilts dipped on the rate decision but soon worked their way back upwards,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“Confidence is growing that the Bank could cut rates either in August or September and that would represent a major turning point in monetary policy and effectively draw a line underneath an era dictated by soaring inflation and rapid rate hikes.

“Investors are looking for a future when inflation is back under control and rates start to ease, and the magic moment looks to be in touching distance.”

Nvidia

“US markets reopened after a day’s holiday and AI chip giant Nvidia continued its ascent. Many investors have taken the view that if Nvidia’s shares are rising, all is well in the world. That’s all very well but it’s no time to be complacent.

“Strong equity market gains, upbeat corporates and cash sloshing left right and centre on share buybacks and dividends might imply good times are here to stay. But history tells us these moments can be the most dangerous as investors forget what could go wrong and simply focus on what could go right.”

Ocado

“It’s a case of one step forward, three steps back with Ocado. Two days after Kantar data showed Ocado to be the fastest growing grocer in the UK for the fourth month in a row, the company has now been dealt a massive blow in Canada.

“One of Ocado’s key partners in North America, Sobeys, says it is not going ahead with plans to open a new customer fulfilment centre in 2025. Given that Ocado is the systems partner for this development, the decision to halt expansion is disastrous for the UK partner. It’s no wonder Ocado’s shares slumped on the news as the dominoes are starting to fall.

“It puts a spotlight on an underappreciated risk – what if other customers also slow down or halt their expansion plans? This is already in motion as Kroger said in March it would close various Ocado-powered sites in the US. Bad news comes in threes, so the market is now worried about who could be next to derail Ocado.

“The stock fell to a seven-year low as today’s news piled onto existing market concerns about the company’s growth prospects. All the share price gains generated by the hype around Ocado supposedly revolutionising the grocery sector have now been wiped out.

“Ocado was meant to have been the magic ingredient in a structural shift for grocers to use robots to make warehouses more efficient and support a surge in online orders. The opportunity didn’t materialise as expected and Ocado has only managed to sign up a few new deals in recent years, despite the pandemic demonstrating the need to have strong systems to support online demand.”

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