The FTSE 100 was a touch weaker in early trade on Thursday; Whitbread led the declining stocks, falling 8 per cent after it reported a fall in sales and profits. This also hit Intercontinental Hotels Group in a read across. Croda, Centrica and Spirax led the advancing stocks this morning while some stocks went ex-dividend, hurting the index. European indices were also trading lower on Thursday morning.
Another day, another record high for gold. Declining nominal US yields and a weaker US dollar provided some support, but neither has been important for the rally. The Federal Reserve’s Beige Book seemed to open the door for an October rate cut. We might still get the CPI in time, but the Fed report also pointed to growing price pressures. Chair Jerome Powell acknowledged the decline in payrolls this week. That might be the wrong way to look at it, but it’s where we are.
The UK economy registered tepid growth in August. So what’s new? Working hard to stand still – wages are growing at 4-plus per cent, inflation at 4 per cent, and the economy can barely do 1 per cent…it’s not enough. Sterling is on the front foot against the US dollar, though, with the greenback offered again as Treasury yields slip. The two-year Treasury note yield is flirting with three-year lows at 3.5 per cent as markets see trade turmoil and recent Fed commentary as quite dovish. Gilt yields are pulling lower on the gravity – comments from UK Chancellor Rachel Reeves on tax hikes yesterday may have soothed some concerns in the gilt market also.
Can you set a price floor for stocks, too, Scott? US Treasury Secretary Scott Bessent said the White House would move to set price floors in some industries to combat China’s non-market economy. Seeing again the flexing of the administration to use industrial policy as a tool to drive its wider economic and trade agenda. Bessent said it wouldn’t consider stock market volatility when dealing with China on trade. Those kinds of comments in the past have left markets on edge. But not yesterday – the S&P 500 rallied 0.4 per cent as it climbed the wall of worry. Bessent also pushed back against a report that China is “betting that the US. economy can’t absorb a prolonged trade conflict” with Beijing. The long and short of this is that Bessent said the US could back down on raising tariffs again on 1 November if China suspends its plans for rare earth export controls. Bloomberg reported that the G7 countries are planning a coordinated response to China’s policy on rare earths. A Trump-Xi meeting is scheduled for later this month ahead of the tariff deadline.
Monster Q3 earnings from the big banks on Wall Street supported the mood. Bank of America and Morgan Stanley joined the party started by Goldman Sachs, Citi and Wells Fargo on Tuesday. The numbers are kind of incredible and should maybe change the way people price banks? I’m not sure, but the indications were positive for the US economy, helping small caps: the Russell 2,000 hit an all-time high, though the Dow Jones was basically flat as Honeywell and Travelers weighed. Bank earnings indicate no worries from trade wars (we were here in April, remember…), though the Federal Reserve’s Beige Book shows businesses are starting to pass on price hikes to consumers. Read more on the US economy here
Nuclear stocks were volatile after the US Army launched a programme to deploy small reactors. Shares of NuScale, a small reactor developer, soared 17 per cent. Oklo and Nano Nuclear first jumped, then closed lower. Investors have been speculating heavily on these names despite none actually deploying a reactor yet. Read more on nuclear stocks here
Elsewhere, AI and chips are still building a positive narrative, even if it looks like a bubble.
TSMC profit jumped 39 per cent to beat estimates and hit another record on AI chip demand.
CoreWeave rose a further 4 per cent in a partnership with Poolside to provide more than 40,000 Nvidia GPUs to bolster the development of Poolside’s AI models. ASML reported bookings 10 per cent ahead of estimates, offsetting some weakness in China.
Finally, is this the end of the black cab? Google’s autonomous ride-hailing service, Waymo, is coming to London next year. It’s the second international launch outside of the US after Tokyo.
By Neil Wilson, investor strategist at Saxo UK