FTSE 100 higher despite US tech sell-off, regulatory probe into Drax over, CrowdStrike suffers fallout from global IT outage, brandy makers toast China backdown and Salesforce beats expectations

“The FTSE 100 ticked higher despite a technology-led sell-off in the US overnight and a negative after-hours reaction to Nvidia’s results – the lack of tech stocks in the UK index proving a rare boon on Thursday morning,” says AJ Bell Investment Director Russ Mould.

“Consumer-facing names were getting some love from the market along with resources stocks on a quiet day in London for corporate news.

“Later today the market will absorb a second estimate of US GDP – with investors hoping for further evidence of a soft landing for the economy as the Federal Reserve readies its first interest rate cut of the current cycle.”

DRAX

“Relief that an Ofgem probe into power station operator Drax has come to an end will be tempered by some pointed criticism of the company’s data governance and controls and the £25 million voluntary redress payment the business will pay.

“There will be relief that Ofgem didn’t find any evidence the company’s biomass wood chips aren’t sustainable or that it had been issued renewables obligation certificates incorrectly. The company receives significant state subsidies and previously came under the glare of the spotlight after a BBC Panorama documentary in 2022.”

Crowdstrike

“The repercussions of CrowdStrike’s botched IT upgrade have come to haunt the company. July’s software bug that caused a global IT outage is already having a negative effect on new business, leading CrowdStrike to cut its revenue and profit forecasts.

“It was inevitable that prospective customers might think twice about signing up to CrowdStrike in the wake of the botched software update over the summer. Companies need to be able to trust that suppliers can get the job done and CrowdStrike’s failures will have prompted greater scrutiny in the boardroom from potential clients as to whether it is up to the job. Its reputation has been dragged over the coals and it needs to resolve the matter fast.

“Existing clients looking to jump ship and move to another provider might find the costs too much to stomach, particularly if they have to keep paying CrowdStrike until the end of their contract term as well as paying a new supplier at the same time. That gives CrowdStrike some breathing space, but it also means it has to act fast to prove its worth to existing clients so they renew contracts.

“In the company’s favour is the fact that global spending on cybersecurity continues to go up. It operates in a vibrant market, albeit one that is increasingly competitive. The mild share price decline on the results implies that the market already expected a hit to new business. CrowdStrike has averted a disaster but it cannot be complacent.

“A big chunk of earnings growth comes from upselling services to existing clients. There now has to be a greater chance that companies reflect on CrowdStrike’s July software configuration catastrophe and decide to spread their risks when it comes to cybersecurity suppliers, not relying on a single entity to do everything.

“It looks like CrowdStrike has put out the fires and got the crisis under control. Now comes the tough part of rebuilding its reputation and cranking the growth machine back into action. That isn’t going to be easy.”

Diageo / Remy Cointreau / Pernod Ricard

“The brandy industry has breathed a sigh of relief after China’s Commerce Ministry said it would not impose a provisional anti-dumping subsidy on brandy imported from the EU.

“Back in January, shares in Rémy Cointreau, Pernod Ricard and Diageo fell on news of a potential investigation into the market by China, representing another point of tension between the Asian country and the West. These tit-for-tat trade disputes have centred upon accusations of unfair competition and protectionism.

“Anti-dumping is an import duty charged in addition to normal customs duty and can be levied when a foreign company sells an item significantly below their normal price. Rémy Cointreau’s shares were worst hit in January on the threat, and it is now the biggest riser on the latest development, surging by 8%.

“Asia is a big market for spirits and European companies should welcome the latest development as it effectively removes a key sales risk.”

Salesforce

“Salesforce might not be at the racier end of the technology spectrum but its latest earnings report demonstrated its ability to create some buzz among investors.

“Salesforce’s leading position in customer relationship management software means it is highly embedded into its clients’ operations and the company is demonstrating an ability to upsell more expensive, premium products to existing customers.

“This supported a beat on the margin and restored some credibility after the damaging first miss on sales estimates since 2006 which the company put up three months ago. As sales growth slows, signs of improving profitability will be closely monitored by the market.

“Pre-market gains were held back a touch by the mixed guidance, with third-quarter projections pitched below consensus estimates, but the anticipated full-year outturn lifted slightly to come in above what had been expected.

“Co-founder, chair and CEO Marc Benioff, never shy of an opinion, compared Microsoft’s Copilot AI offering unfavourably with Salesforce’s soon-to-be-launched Agentforce product. This is expected to go beyond traditional chatbots to actually resolve customer inquiries on its own – with more details expected at the firm’s Dreamforce conference in September. Benioff says there could be a billion such agents in service by the end of the 2026 financial year.

“Benioff is under pressure given the recent sales miss and the presence of activist investors Starboard and ValueAct on the shareholder register, both increasing their positions earlier this month, and the shares have drastically underperformed broader market indices in the US so far in 2024. While the latest update is a nudge in the right direction, the company and Benioff still have plenty to do.”

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