Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
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London Quick Take - 4 August - Stocks try to stabilise after tariffs + weak US jobs report, Lloyds, Close Brothers jump on car financing ruling
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
London Quick Take – 4 August - Stocks try to stabilise after tariffs + weak US jobs report; Lloyds, Close Brothers jump on car financing ruling
Key Points
- Stocks rise after sharp pullback on Friday's weak jobs report and tariff announcements
- Lloyds and Close Brothers rally sharply following car financing ruling by UK's Supreme Court
- US jobs report signals economic weakness and market reprices for September rate cut by the Fed
- Palantir earnings due up today with BP later this week
Tariffs plus really weak jobs numbers dealt a big blow to risk sentiment on Friday, pushing shares sharply lower. US nonfarm payrolls come in at +73k vs. +104k expected, but the net revisions of the prior two months was -258k, sending the US dollar and US yields lower. Stocks were already wobbling after Trump didn’t chicken out with his tariffs and the combination left markets hobbled. The S&P 500 closed down 1.6% for the day while the Nasdaq fell 2.24%. Amazon -8.3% dragged tech lower on weak cloud forecasts, while Apple -2.9% slipped despite solid results. Odds of a September Fed cut surged above 85%.
We're seeing a bit of stabilization today from Friday’s outsize move to the downside. European stock markets opened in the green on Monday morning, with the FTSE 100 ticking up a couple of points after falling 0.7% on Friday to snap a five-day win streak. The DAX was up around half a percent after rolling over more than 3% across Thursday and Friday due to tariff damage. US futures are higher.
Citi: “The recent rally in global equities means market pricing for EPS growth looks extended, especially in the US. Combined with signs of economic slowdown, tariffs could raise questions over the sustainability of continued near-term equity market upside.”
On the revisions to the jobs numbers – clearly there is something going badly wrong with the data, which makes it hard to know exactly what is happening. But the implication is that payrolls could already be in decline. Maybe Trump is right after all? The payrolls data was surprisingly soft – although not to some. Trump ramped up the ‘too late’ attacks on Fed chair Jay Powell as market pricing reflected traders piling back into bets the Fed will cut in September. Is the market guessing right? I think the FOMC’s view is that inflation is further away from where it wants it to be than employment is. Plus, Jay will want to dangle Donald for as long as he possibly can. Outgoing Fed chairs always stay tight and Powell has the added benefit of being able to upset his tormentor-in-chief.
Elsewhere, it was a broadly positive decision from the Supreme Court as far as the banks are concerned on the car financing case – an industry-wide compensation scheme will cost lenders between £9bn and £18bn, according to the FCA, but the ruling removed the risk of larger bills down the line. It’s more than they’ve set aside so far but less than some of the top end estimates. Close Brothers jumped 27% on the move - shares were down 10% in the week leading up to the ruling, while Lloyds rose 7% having been down over 6% last week. This morning Lloyds said it will keep its £1.2bn provision for claims unchanged and that it “believes that if there is any change to the provision it is unlikely to be material in the context of the Group”. Close Brothers just said it’s looking forward to working with the FCA on its consultation.
The Bank of England is set to cut rates this week but expect another three-way split...will need to go deeper.
BP has announced its biggest oil and gas discovery in 25 years, off the coast of Brazil. Shares were up a touch but investors are more focused on second quarter earnings later this week, after the company last month issued guidance that things were maybe not as bad as feared. Since the update in July it’s named Albert Manifold as successor to Chairman Helge Lund, a move that underscores the regime shift going on at the oil major.
Opec+ group agreed to raise oil output by 547,000 barrels per day for September – prices firmer today after two big declines Thursday and Friday pushed prices back below their 200-day daily moving average.
Palantir earnings will be the main focus later tonight since it’s fast becoming one of the largest listed names on the S&P 500 – last week it made the top 20 largest American companies after the rally in shares saw it surge through the $375bn market cap level. Preview here.
Finally, Morgan Stanley says three-quarters of European market cap has reported Q2 earnings with a skew to beats, but note “mixed guidance against a heavily downgraded consensus”. Defence, Telcos & Banks are the “bright spots”.
We're seeing a bit of stabilization today from Friday’s outsize move to the downside. European stock markets opened in the green on Monday morning, with the FTSE 100 ticking up a couple of points after falling 0.7% on Friday to snap a five-day win streak. The DAX was up around half a percent after rolling over more than 3% across Thursday and Friday due to tariff damage. US futures are higher.
Citi: “The recent rally in global equities means market pricing for EPS growth looks extended, especially in the US. Combined with signs of economic slowdown, tariffs could raise questions over the sustainability of continued near-term equity market upside.”
On the revisions to the jobs numbers – clearly there is something going badly wrong with the data, which makes it hard to know exactly what is happening. But the implication is that payrolls could already be in decline. Maybe Trump is right after all? The payrolls data was surprisingly soft – although not to some. Trump ramped up the ‘too late’ attacks on Fed chair Jay Powell as market pricing reflected traders piling back into bets the Fed will cut in September. Is the market guessing right? I think the FOMC’s view is that inflation is further away from where it wants it to be than employment is. Plus, Jay will want to dangle Donald for as long as he possibly can. Outgoing Fed chairs always stay tight and Powell has the added benefit of being able to upset his tormentor-in-chief.
Elsewhere, it was a broadly positive decision from the Supreme Court as far as the banks are concerned on the car financing case – an industry-wide compensation scheme will cost lenders between £9bn and £18bn, according to the FCA, but the ruling removed the risk of larger bills down the line. It’s more than they’ve set aside so far but less than some of the top end estimates. Close Brothers jumped 27% on the move - shares were down 10% in the week leading up to the ruling, while Lloyds rose 7% having been down over 6% last week. This morning Lloyds said it will keep its £1.2bn provision for claims unchanged and that it “believes that if there is any change to the provision it is unlikely to be material in the context of the Group”. Close Brothers just said it’s looking forward to working with the FCA on its consultation.
The Bank of England is set to cut rates this week but expect another three-way split...will need to go deeper.
BP has announced its biggest oil and gas discovery in 25 years, off the coast of Brazil. Shares were up a touch but investors are more focused on second quarter earnings later this week, after the company last month issued guidance that things were maybe not as bad as feared. Since the update in July it’s named Albert Manifold as successor to Chairman Helge Lund, a move that underscores the regime shift going on at the oil major.
Opec+ group agreed to raise oil output by 547,000 barrels per day for September – prices firmer today after two big declines Thursday and Friday pushed prices back below their 200-day daily moving average.
Palantir earnings will be the main focus later tonight since it’s fast becoming one of the largest listed names on the S&P 500 – last week it made the top 20 largest American companies after the rally in shares saw it surge through the $375bn market cap level. Preview here.
Finally, Morgan Stanley says three-quarters of European market cap has reported Q2 earnings with a skew to beats, but note “mixed guidance against a heavily downgraded consensus”. Defence, Telcos & Banks are the “bright spots”.
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