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London Quick Take - 5 Things to Know in Markets Today - 27 Oct
5 Things to Know in Markets Today
1.Anthropic IPO lifts AI trade
Stocks rallied after Anthropic's IPO filing reignited the AI trade after a bruising 3 weeks, bolstering risk sentiment. The Nasdaq-100 rose 1% and semiconductors (SOXX) rallied almost 3% off its 200-day line and Nvidia popped +2.4% while the S&P 500 climbed +0.7%. Startling revenue growth shown in the IPO prospectus helped lift the mood. There's good momentum overnight with Tokyo +1.8% and Softbank +5%, while the Kospi rose +3% as the SK Hynix and Samsung Electronics pairing jumped. Neoclouds came under pressure after Elon Musk warned hundreds would go bust due to financing constrains and a lack of cash flow. But the Anthropic prospectus dropped soon after and put a bid under CoreWeave and IREN, though Nebius fell –3.5%. Tesla jumped +5% after a Barclays upgrade highlighted potential benefits from a SpaceX merger, while Meta slipped -2% after unveiling plans to raise up to $95 billion to fund AI infrastructure, later topping that up to $97.5bn, of which $3bn will come from an investment by Nvidia.
European stocks are not picking up on the AI-led recovery, failing to extend gains from yesterday's session. The Stoxx 600 gained +0.8% on Monday, while DAX rose +0.9% and the FTSE 100 added +0.7%. Defence stocks got a lift with Rolls-Royce +6% on reports the Chancellor will set out the UK's path to meeting NATO target by 2030 in the Budget tomorrow. This morning there's a bit of caution at the start of the day with modest losses in Frankfurt and Paris, while London fell around 1% early with a big drag from index heavyweight HSBC after results missed. Oil prices have firmed up a bit above $116 after yesterday's pullback from the 6-month highs.
European stocks are not picking up on the AI-led recovery, failing to extend gains from yesterday's session. The Stoxx 600 gained +0.8% on Monday, while DAX rose +0.9% and the FTSE 100 added +0.7%. Defence stocks got a lift with Rolls-Royce +6% on reports the Chancellor will set out the UK's path to meeting NATO target by 2030 in the Budget tomorrow. This morning there's a bit of caution at the start of the day with modest losses in Frankfurt and Paris, while London fell around 1% early with a big drag from index heavyweight HSBC after results missed. Oil prices have firmed up a bit above $116 after yesterday's pullback from the 6-month highs.
2.HSBC shares tumble on profit miss
HSBC shares tumbled after earnings missed lofty expectations. The stock plunged 7% despite the bank's pre-tax profits rising 32% to $9.6bn, helped by the lack of a $1.4bn legal provision in the year-ago results. Revenues rose 5% but were approximately 2% shy of expectations at $18.6bn vs. $18.93bn expected. On the plus side, net interest income rose to $93.bn from $8.8bn, while the 18.8% return on tangible equity in the year to date is way ahead of its medium-term guidance of around 17%. So, despite some pretty good headline numbers, investors were expecting a lot more from higher interest rates and a cost-cutting programme that took expenses down –12%. Budget uncertainty remains a factor – profits are strong, albeit a little below expectations. Expect banks to get hit by an increase in the surchage tomorrow in the Budget.
3.Reckitt wrecked
Reckitt Benckiser shares also tumbled –5% after cutting full-year sales guidance after a slowdown in the US and problems with its China supplements business. The firm took its full-year like-for-like net revenue guidance down to a range of 3.5%-4.5%, from a 4%-5% range before. Revenues +3.3% in the third quarter were below the +4.1% expected. This was driven by production issues in North America that hurt sales of Lysol cleaning products. China sales were hit by a slowdown in its vitamin and supplements business, which left emerging market sales growth a little short of expectations at +8%.
4.Euro under pressure
The euro is under pressure again, with EURUSD below 1.1150, close to the 18-month lows hit two weeks ago after French consumer confidence crashed to 80 in October vs est. 85 — the lowest since June 2013. Sterling too is back off as the USD catches some bid across the board. Having backed off to 4.90% on Monday, French 10yr OAT yields are up 5bps today. Treasury yields remain pretty steady with the US 10yr still below 5%, while the 10yr gilt yield is down a few ticks this morning.
5.Big week ahead
Looking ahead, Coca-Cola, Robinhood and Boeing report later while the triple-hyperscaler test comes later in the week as Microsoft, Alphabet and Amazon report. Meanwhile, the Federal Reserve kicks off its two-day policy meeting today, with markets fairly convinced that it will leave rates unchanged and wait for December before looking to hike again in this cycle. Israel holds legislative elections today. And the UK Budget is tomorrow.
Get the full rundown of the week's key events here.