Defensives slip as FTSE 100 starts lower, Centrica energised by nuclear plant extensions and Salesforce earnings impress

“The FTSE 100 started sluggishly on Wednesday as traditionally defensive sectors like pharmaceuticals and utilities were on the back foot,” says AJ Bell Investment Analyst Dan Coatsworth.

“These names had been in demand on Tuesday afternoon after South Korean president Yoon Suk Yeol briefly declared martial law. The situation seemed to de-escalate as quickly as it had escalated, with lawmakers voting to invalidate the decision.

“For now, investors seem to be relaxed about the situation with US stocks hitting new record highs yesterday and Asian stocks also proving robust.

“Oil prices were steady ahead of tomorrow’s OPEC+ meeting where the producers’ cartel is expected to extend output cuts until the end of March 2025. Whether they can have any impact on prices remains to be seen.”

Centrica

“The decision to extend the life of four ageing nuclear power plants was something British Gas owner Centrica had little control over, but it still energised the company’s share price.

“Centrica has a meaningful stake in the four EDF-partnered nuclear power plants. The extension comes as the UK looks to avoid the risk of blackouts amid the transition away from fossil fuels to renewable energy sources.

“Nuclear energy is more reliable as baseload energy than wind and solar which are dependent on unpredictable weather conditions.

“Whether through accident or design, Centrica has been well-positioned through the last few years to perform during a volatile period for the energy market – largely thanks to its wholesale operations rather than its British Gas retail arm – as energy security has emerged as a key priority for the UK.”

Salesforce

“Yet again AI is proving a driver for a big US tech company – this time it is cloud-based software outfit Salesforce.

“The customer relationship management expert lauded the impact of its new autonomous AI agent for business customers Agentforce, launched in October, as it unveiled third-quarter results which topped estimates and lifted guidance for the fourth quarter.

“Agentforce can complete administrative and customer support functions without human supervision and the company recently acquired a developer of AI-powered voice agents to build out its capabilities.

“Activist investor Starboard Value’s efforts to get Salesforce to focus on building up profitability seem to be paying off, judging by these numbers.

“However, there will be some concern about the company maintaining its discipline as it has been hiring marketing staff at pace to try and sell Agentforce.

“The main beneficiaries of AI to date have been on the hardware side – the next stage is software. While these quarterly numbers represent a good start for Salesforce in demonstrating the scale of the opportunity, the company still has more to prove.”

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