The Cambridge Weekly- 23rd February

The negotiations have centred around constraining Tehran’s nuclear programme in exchange for US sanctions relief. Both sides have indicated that the talks are progressing positively; however, it appears that a final agreement is still a way away. In recent weeks, oil prices have been rising in anticipation of potential supply disruptions in the region.

Two of the world’s largest mining companies reported earnings last week, with both Australia-based BHP and Anglo-Australian Rio Tinto highlighting the growing strategic importance of copper production. The red metal has seen a 25% increase in price over the past year, driven by increased demand for AI-related infrastructure. Copper is vital for the production of data centres, power grids and other electronic devices. Although both companies have historically focused their attention on iron ore, BHP derived more than half of its profit in 2025 from copper for the first time, whilst Rio Tinto’s CEO said that 85% of the firm’s exploration budget is now being allocated towards copper-related projects.

US Equity Market:
A Bank of America survey published reently showed that fund managers have been reducing their exposure to the US dollar, with market sentiment toward the currency now at its weakest level since the survey began in 2012. The dollar has already fallen 1.3% against a basket of other major currencies this year, following a 9% decline in 2025. The appointment of Kevin Warsh to become the new Federal Reserve chair in May is being received with mixed opinions; 60% of fund managers surveyed expect his appointment to further weaken the dollar over the course of the year.

US markets were closed last Monday for Washington’s birthday, however they are up over 1% since Tuesday’s opening bell, as of close on Friday. Walmart, which is the world’s largest retailer and recently joined the $1tn market cap club, posted strong earnings figures last Thursday, helping support the broader index. This rebound follows a volatile couple of weeks, with many stocks being punished on concerns around AI disruption within their industries.

UK Equity Market:
The FTSE 100 hit back to back all-time highs last week on Tuesday and Wednesday, closing Wednesday’s trading session at 10,686. The index was boosted by strong quarterly results from mining and defence firms including Antofagasta, Anglo American, Glencore, and BAE systems. Increased expectations of interest rate cuts at the Bank of England meeting next month, following the release of the January inflation figures, was also a tailwind for the index.

The FTSE 100 is now up around 7% since the start of January, building nicely upon the 21.5% gain in 2025.

Inflation, Interest Rates and Bond Markets:
The UK’s annual inflation rate dropped to 3% in January, bolstering the case for the Bank of England to cut interest rates at the next meeting. The previous meeting saw a close 5-to-4 vote in favour of holding rates at their current level of 3.75%, however the latest data supports loosening monetary policy. Options markets are now pricing in around a 90% probability of a 0.25% cut at the March meeting.

Gilt investors are worried that increased defence spending could lead to a bond-market rout, further increasing borrowing costs for the government. The UK’s 10-year borrowing cost is currently the highest in the G7, driven by fiscal concerns and the sheer levels of debt issuance. The UK has committed to increasing defence spending to 3.5% of GDP by 2035, in line with NATO commitments. The funding shortfall is estimated to be £28bn over the next decade, leading the government to explore ways of raising capital without breaching its self-imposed borrowing limits.

What’s on the horizon
It’s a relatively quiet week ahead on the macro front. Japan and Australia are due to release their January Consumer Price Index inflation figures, whilst Germany are set to release preliminary inflation figures for February. The US will release its Producer Price Index data on Friday – a figure widely viewed as a leading indicator of consumer price trends.

On the corporate front, attention will turn to Nvidia on Wednesday as the world’s largest listed company reports its latest quarterly earnings figures. With the firm now accounting for over 7% of the entire S&P 500, its results can have a meaningful impact on the performance of the overall index. Beyond the direct market impact, the results will serve as an important litmus test for investors assessing the ongoing momentum of the AI investment ecosystem. Higher-than-expected earnings and revenues would support the idea that the AI buildout still has some steam, whilst any disappointment could unsettle investors and spark a broader downturn across AI-related sectors.

Berkshire Hathaway, who will report their own figures on Friday, has recently cut its investments in technology companies such as Apple and Amazon in favour of more defensive holdings in the energy and insurance sectors. Whilst Berkshire didn’t explicitly say why they sold their stakes in these companies, the timing coincides with a broader market sentiment that large AI-related capital expenditures may not deliver the results that investors had originally hoped for.

The Cambridge Team

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Source of financial market data: MorningstarDirect.