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“Investors already have more than enough on their plate. Now they find themselves having to make room for one more worry, as tensions build between the US and China,” says AJ Bell Investment Director Russ Mould.
“After several trade spats during the Trump administration, things had largely calmed down under his successor. But Nancy Pelosi’s visit to Taiwan to see the president there has been met with stern warnings from Beijing.
“So far the response has been to hold military drills and step up sanctions on a country it regards as a breakaway province. However, a sell-off on Wall Street suggested there is concern about an escalation.
“Asian stocks had a more measured response, but the FTSE 100 was lower on Wednesday morning. It still feels like markets are on something of a precipice, with an inconclusive earnings season not providing the catalyst for either major gains or significant losses just yet.
“Oil was flat ahead of an OPEC meeting where the cartel is widely expected to agree to either increase output slightly in September or maintain it. Crude has dropped sharply from its recent highs, with an economic slowdown expected to hit demand.
“Given OPEC has been struggling to hit production targets anyway, traders may treat whatever comes out of its latest summit with some scepticism.”
Taylor Wimpey
“First half results from Taylor Wimpey were impressive, no question about it. To be guiding toward profit at the top end of consensus forecasts, despite facing challenges around surging raw material costs, shortages of skilled workers and lingering supply chain issues, is no mean feat.
“Unlike some of its peers, Taylor Wimpey is on track to hit volume targets and, like a gazelle eluding a hungry lion, house price growth somehow continues to outpace inflationary and interest rate pressures for now.
“The way the housebuilders have been sold off in 2022, with Taylor Wimpey among them, suggests the market reckons they can’t win this race forever.
“This seems a logical position to take. Rising mortgage costs and other pressures on household finances are very likely to hit demand. This could shake the foundations of the housebuilding sector but, unlike before the Great Financial Crisis 15 years ago, those foundations are at least built on relatively sold ground.
“Taylor Wimpey is not alone in having a strong balance sheet and it has invested in land at attractive prices.
“This, plus the long-standing supply and demand imbalance in the UK housing market, provides at least some confidence in the long-term outlook.”
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