London midday: FTSE extends losses amid tech selloff

(Sharecast News) - London stocks had extended losses by midday on Friday amid renewed concerns about relations between the US and Iran following reports the latter was responsible for an attack on a cargo ship near the coast of Oman, and as the tech selloff continued.

The FTSE 100 was 0.8% weaker at 10,448.52, while Brent crude was down 3.5% at $72.66 a barrel and West Texas Intermediate was 3.4% lower, at $69.45.

On Wall Street and in Asia the tech selloff continued, with Apple under the cosh after it hiked prices on iPads and MacBooks, citing rising memory and storage chip costs. Microsoft also slumped as it lifted the price of Xbox consoles.

Susannah Streeter, chief investment strategist at Wealth Club, said: "The markets have been wracked with volatility this week, and the seesaw moves just keep coming. Investors are super-wary about the fragility of the Middle East peace deal after a vessel was struck while transiting the Strait of Hormuz. Fears of geopolitical fracture opening up again are colliding with a return of worries about super-high-tech valuations.

"The selloff in tech stocks has resumed after some brief mid-week respite, with Asian indices plunging dramatically. The Nikkei slid by 5% and South Korea's Kospi, the home of semiconductor heavyweights Samsung and SK Hynix, dived by 8%. With valuations so stretched, even a slight turn in sentiment shows up in big moves. Right now, investors are highly sensitive to worries about how long the voracious demand for chips to power the AI revolution will last.

"The triggers setting off this latest wave of selling are rate hike fright and supply chain fears. The fight for memory chips, which has pushed up prices to eye-watering levels, is showing up in sharp increases for end-users, with Apple and Microsoft forced to hike prices for devices and consoles. There's a feeling that there's only so long this can go on for, with companies also baulking at the high cost of tokens used to pay for the use of large language models."

In equity markets, defensives British American Tobacco and Imperial Brands were the top performers on the FTSE 100.

Housebuilders Barratt Redrow and Bellway both rallied on the back of an upgrade to 'buy' from 'hold' at Berenberg. The bank said it was reviewing its earnings forecasts, ratings and price targets for the UK housebuilders under its coverage.

"Our market view and forecasts reflect a pretty downbeat outlook," it said. "However, within this sombre framework we think there are interesting opportunities emerging when we consider three factors: valuation, balance sheet and capital returns. Indeed, it is these three factors that underpin the upgrades to buy in this note of Barratt Redrow and Bellway."

Berkeley Group slumped, however, as Berenberg downgraded the stock to 'hold' from 'buy'. It said its long-held admiration for the company's differentiated business model, with impressive operational and financial outcomes, is unchanged.

However, it is downgrading its rating given the stock's relative outperformance, which means the valuation - at 1.0 TNAV - and upside are less compelling than other opportunities in sector.

Elsewhere, XPS Pensions nudged up after saying it had bought the trade and assets of Austin Professional Resourcing, a UK-based specialist actuarial consultancy, for �3.3m in cash on completion. There is a further �10m payable in years two and three, contingent on achieving certain stretching business performance criteria.