London Quick Take – 16 September – Trump visits UK, Sterling jumps to 2-month high, Tesla turns positive YTD

Donald Trump has called for US companies to abandon quarterly reporting, shift to a semi-annual model. Having to cover this stuff, I can say that’s something I and many like me could get behind! On a more serious note, the idea has plenty of merit – for instance it could foster a change where management focus all their efforts not on the next quarterly target, instead taking a more measured, long-term view. But it could increase share price volatility around earnings – it's already quite high when companies report. It could also erode transparency for shareholders.

The Trump show pulls into Windsor this week as he begins a second state visit.

UK jobs data this morning showed unemployment at a four-year high of 4.7%, and crucially a slowdown in wage growth as the jobs market cools. The number of vacancies fell while payrolls shrank 142k..the jobs picture is deteriorating, and the BoE should be cutting deeper and faster. It won't, however, cut rates this week when it meets. Sterling though is not caring about this because wage growth is still a little sticky despite falling and the dollar is being roundly offered ahead of the Fed decision. Cable this morning has pushed up to its best level since early July, clearing 1.3630, whilst the pound is much steadier against the euro, which made a thrust up to resistance at 1.18.

Wall Street rose to fresh record highs following some positive comments on China trade talks from US president Donald Trump and as investors look ahead to the start of the Fed’s two-day policy meeting today. The S&P 500 closed above 6,600 for the first time, while the Nasdaq climbed almost 1%. And whilst European stock markets rose yesterday and Japan and South Korea hit fresh record highs overnight, the stronger pound is a bit of a drag on the FTSE 100’s multinationals.

Tech was largely positive, with Alphabet achieving the $3tn market cap level with a gain of 4% yesterday. The company is announcing as multi-billion dollar investment in the UK today as part of Donald Trump’s state visit.

Tesla shares rallied after Elon Musk disclosed an insider buy worth $1bn, his largest ever purchase in the open market. Tesla has now erased its loss for the year, rising 85% off its April lows. Microsoft and Apple both rose 1%, while Nvidia was a shade lower after China accused the company of breaching monopoly rules.

The action yesterday and today is likely mainly centred on traders being positioned for the expected rate cut on Wednesday. A lot of the market reaction will depend on how open the Fed seems to further cuts.

On that front, the market is all but certain the Fed will cut. I’ve detailed before the reasons why that may not be the case – payrolls growth doesn’t have to be the same as it was 12 months ago because labour supply has shrank, inflation is running hotter than the Fed would like, and Powell might just feel inclined not to bow down to the administration.

On the point of labour supply, estimates vary, but the ‘breakeven’ point of job creation, which is the number of new jobs needed to keep unemployment at the ‘right’ level. According to the St Louis Fed economists Alexander Bick and Victoria Gregory estimate that the breakeven number of jobs that the US economy must create each month has come down from 155,000 in April to a range of 32,000-82,000, driven almost entirely by a large reduction in net migration. As I've kept saying in these pages, payrolls growth does not need to come close to what it had to a year ago. (Especially pertinent if you consider the actual payroll numbers a year ago didn’t actually come close to the reported numbers, with total payrolls revised down 911,000 in the year to March 2025.)

But assuming the Fed does cut tomorrow, I'd still anticipate the Fed saying that the “extent and timing” of further policy adjustments will be dependent on incoming data, and not on a preset course. The market will choose how to take that. But...Fed cutting into US growth reacceleration could be positive for small caps. Gold has hit a fresh record on an anticipation of lower rates and higher inflation + continued narrative around central banks swapping USD for gold. DXY this morning is retesting lows near the 97.0 level.

We should note that the meeting takes place amid quite extraordinary circumstances – the administration failed in a last-ditch attempt to oust governor Lisa Cook before the meeting begins, while Trump pick Stephen Miran has been confirmed.