Uk Stocks Surge To Fresh Record As Global Tech Sell-Off Fades Into The Background

FTSE 100 Hits Record High Amid Tech Sell-Off

The UK’s FTSE 100 stock index reached a fresh record high on Wednesday morning, defying the global tech stock sell-off and sending shockwaves through Asian markets. The blue-chip index rose as high as 10,951 points before falling back slightly, its best level since February 27, when the US and Israel launched attacks on Iran, sparking widespread market volatility.

The FTSE 100’s climb was largely driven by strong corporate results from companies in the finance and energy sectors, which have historically been less affected by tech-related sell-offs. The index is heavily weighted towards these sectors, providing a degree of insulation against the AI-driven downturn that has rattled other global markets.

On a day marked by fresh losses for the tech-heavy Nasdaq index, the FTSE 100 closed up 0.3% at 10,908, marginally below its record closing value of 10,910 in February. This modest gain was attributed to the announcement of increased shareholder payouts from Standard Chartered and Rio Tinto, two companies with significant presence on the FTSE 100.

Standard Chartered announced a rise in shareholder payouts on Wednesday, while Rio Tinto also reported a boost in dividend payments. These moves were seen as positive indicators for the broader market, which had been weighed down by concerns over AI spending and its impact on global markets.

However, the tech sector continued to struggle, with shares in companies linked to AI plummeting for the second consecutive day due to concerns about reduced spending on the technology. The Kospi index in South Korea fell 6% after falling almost 11% the previous day, reaching its lowest level since early April and marking an almost 40% decline from the peak reached just over a month ago.

Disappointing results from SK Hynix, the world’s second-largest chipmaker, were cited as evidence of investors’ growing unease over the long-term prospects of the AI trade. The company reported record profits for the second quarter but undershot investors’ expectations, leading to shares falling as much as 20% before recovering to 10% down.

Analysts pointed to the disappointing results from SK Hynix and its fellow chipmaker Samsung Electronics, which tumbled further, closing 5% lower. The two companies together account for more than half of the market capitalization of the Kospi index, giving them significant influence over the market.

“The tech sector has become the epicentre of the AI trade,” said Gary Tan, a portfolio manager at Allspring Global Investments in Singapore. “SK Hynix delivered strong results, but in today’s AI market, strong is no longer enough. Investors were looking for additional catalysts, particularly around long-term agreements and shareholder returns, to support a memory sector that has become the epicentre of the AI trade.”

The sell-off was also attributed to small-time investors who had led the charge on buying chipmakers’ stocks using borrowed money. While this pushed stocks higher in last month’s rally, it has worsened the sell-off as many have pulled their money out.

Meanwhile, oil prices continued to rise after the US military said it had knocked down an Iranian missile barrage and worked with Saudi Arabia’s forces to strike sites in Iraq that Tehran-backed militias had recently used to launch attacks. Brent crude, the international benchmark, rose above $90 a barrel by late afternoon in London, a rise of more than 7%.

The oil price increase was seen as a positive indicator for the broader market, which has been influenced by geopolitical tensions and conflicts. The FTSE 100’s lack of exposure to technology and AI stocks also played a role in its resilience.

“The FTSE 100 has been helped by its lack of exposure to technology and AI stocks, and a slew of strong corporate results,” said Russ Mould, investment director at AJ Bell. “Index heavyweights like Standard Chartered, Reckitt Benckiser, and Rio Tinto all delivered either better-than-expected profits or bumper cash returns to shareholders, or both.”

The FTSE 100’s resilience has been attributed to its broad-based composition, which includes companies with diverse revenue streams and business models. This diversity has helped the index weather the AI-driven downturn that has affected other global markets.

In contrast, Asian markets, particularly South Korea and Japan, have been more heavily impacted by the sell-off in tech stocks. The Kospi index in South Korea fell 6% after falling almost 11% the previous day, while the Nikkei in Japan closed at a two-month low.

The government of South Korea has announced plans to review market stabilisation measures, with Finance Minister Koo Yun-cheol stating that the government was taking steps to address concerns over market volatility.

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