Access both platforms from your single Saxo account.
London Quick Take - 5 Things to Know in Markets Today - 5 Nov
5 to Know in Markets Today - Midterms Special
1.Off to the races
Tl/DR: off to the races; Brent to 2-month low at $95, FTSE futs tick 11k, Dow +3%; FOMO is kicking in classic post-midterms end-of-year rally as political overhangs recede, with positioning light, leadership broadening, rotation into value, and flow dynamics increasingly looking supportive.
The FTSE 100 opened sharply higher, up around 1% near the 11,000 marker as positive momentum from yesterday's Blue Wave relief rally continues to underpin risk sentiment and drive rotation from momentum into value. The dynamic is very supportive of UK equities. The dollar remains offered with sterling touching horizontal round number resistance at $1.35 while gilt yields are down along with over sovereigns. There's a much more upbeat tone as oil prices have tumbled, though some AI-related stocks are still feeling intense heat. The Kospi, a high beta leveraged bet on AI, sank 5% overnight with SK Hynix down almost 10% and Samsung Electronics more than 7.5% lower. It comes after a bit of drubbing for certain AI-related names in the US yesterday despite the broader market rally. This is all about broadening leadership and healthy market rotation. Everything just about on the FTSE 100 is up save for the oil majors as crude plummeted and BAE Systems dropped over 3% in sympathy with Rheinmetall, which plunged 17% after cutting guidance on stalled military contracts. The whole defence ecosystem has taken a bit of a hit from the blue wave. Next was up a bit on the inevitable beat but not much because it didn't raise guidance.
The FTSE 100 opened sharply higher, up around 1% near the 11,000 marker as positive momentum from yesterday's Blue Wave relief rally continues to underpin risk sentiment and drive rotation from momentum into value. The dynamic is very supportive of UK equities. The dollar remains offered with sterling touching horizontal round number resistance at $1.35 while gilt yields are down along with over sovereigns. There's a much more upbeat tone as oil prices have tumbled, though some AI-related stocks are still feeling intense heat. The Kospi, a high beta leveraged bet on AI, sank 5% overnight with SK Hynix down almost 10% and Samsung Electronics more than 7.5% lower. It comes after a bit of drubbing for certain AI-related names in the US yesterday despite the broader market rally. This is all about broadening leadership and healthy market rotation. Everything just about on the FTSE 100 is up save for the oil majors as crude plummeted and BAE Systems dropped over 3% in sympathy with Rheinmetall, which plunged 17% after cutting guidance on stalled military contracts. The whole defence ecosystem has taken a bit of a hit from the blue wave. Next was up a bit on the inevitable beat but not much because it didn't raise guidance.
2.Donny DeVeto
Donny DeVeto: Gridlock means stocks are higher. Oil prices have tumbled on hopes that the stinging defeat for President Trump will push a peace deal a lot closer. That is good news for inflation could see central banks hold off on more hikes. The 10yr Treasury yield fell some more and is down 50bps from its highs hit at the start of last month. The Bank of England is probably too late into its decision to stop now and will raise rates reluctantly today as a pre-emptive move to contain second order inflation effects. Eurozone October CPI jumped to 4.0% from 3.8% in September, above forecasts. The data would tend to bolster the case for an ECB rate hike in December, but oil prices are moving in the right direction.
However, a deal to end the war between the US and Iran is not actually within reach, at least not officially, and escalation risks remain. JD Vance is making a big effort to distance himself from the war and Trump and the loss. Whether that means he's the peacemaker is another matter. The market has just taken a big chunk of Trump geopolitical risk premium out of the price. Brent crude is flat today at $95 having tumbled yesterday by around 9% to test the 200-day line at $93.50, with the 50-day line now at the top of yesterday's candle acting as resistance should things flare up once more. Gas prices have fallen about 19% from their highs, too. Cost of living worries are fading away with the blue wave but risks remain extremely elevated and the sharp decline in crude means the market is offside for any escalation.
However, a deal to end the war between the US and Iran is not actually within reach, at least not officially, and escalation risks remain. JD Vance is making a big effort to distance himself from the war and Trump and the loss. Whether that means he's the peacemaker is another matter. The market has just taken a big chunk of Trump geopolitical risk premium out of the price. Brent crude is flat today at $95 having tumbled yesterday by around 9% to test the 200-day line at $93.50, with the 50-day line now at the top of yesterday's candle acting as resistance should things flare up once more. Gas prices have fallen about 19% from their highs, too. Cost of living worries are fading away with the blue wave but risks remain extremely elevated and the sharp decline in crude means the market is offside for any escalation.
3.BoE set to hike
The Bank of England is expected to raise rates today. It's got a chance it won't, and I don't think it needs to. The BoE is starting from a far more restrictive position than either the ECB or Fed, and the labour market is struggling to maintain jobs even if productivity is improving and GDP remains resilient. As I asked before, is the BoE leaning on inflation and the 'economy' or is it leaning into households, who really could do without another increase in their costs. The market is still too hawkishly priced and cooling inflation could support case to be one and done.
4.Dow logs best day since April 2025
Nasdaq-100 futures dropped as much as 2.4%, and S&P 500 futures fell 1.4% on the kneejerk response to the Blue Wave. Calmer heads prevailed to send he market resoundingly higher with SPX finishing +1;.58% higher to 7,688 and NDX +0.9% on the day, though well off the highs. The Dow Jones rallied some 3% on Mag7 strength, its best day since April 2025. Slowing AI infrastructure buildout from the Democrats seizing Congress and key governorships is bad for some key picks-and-shovels names; Micron and Marvell each fell 7%, while the likes of Seagate, Western Digital and Nebius were under the cosh. But it's better news for cash-flow rich incumbents who might be forced to slow the frontier (ie capex) like Mag7 stocks like Apple, which rose 5% to a record high, while Microsoft and Amazon both rose more than 6%. Consumer Staples record hit a record high. Qualcomm fell after earnings despite beating estimates, as did Arm Holdings despite raising guidance for the third quarter on the AI spending boom.
5.Setup looks compelling for stocks
As per my previous comments, and some more meaty analysis from Citadel, the setup is compelling. Earnings are above lofty expectations and multiples are contracting. 65% of index weight has reported and more than four-fifths has beaten on EPS. Tech has seen the largest compression with the Nasdaq 100 trading around 19.1x forward earnings, the lowest multiple since October 2022 and 24% below its January peak, per figures from Citadel. Forward earnings are +14% since June but the multiple is down by a fifth. NDX's 5% premium to the S&P 500 is the smallest since January 2017, well below its ten-year average of ~20%. Information Technology at 18.2x is the lowest since March 2020.
Semiconductors have been most affected, down to 13.8x forward earnings, almost 50% below January peak and the lowest since July 2022, also per Citadel. The 25% discount to the rest of SPX is the widest since December 2018. This is despite forward earnings +30% since June and sector driving half of the index's Q3 EPS growth.
Broadening in market leadership – SPX equal weight was +5% in Oct vs a 10% decline for NDX as 72% of stocks were risers last month. Positioning has reset lower after the significant de-grossing event through October, which means funds are in a position to plough back in. Tailwinds from buybacks are returning as the Q3 blackout comes to an end.
Semiconductors have been most affected, down to 13.8x forward earnings, almost 50% below January peak and the lowest since July 2022, also per Citadel. The 25% discount to the rest of SPX is the widest since December 2018. This is despite forward earnings +30% since June and sector driving half of the index's Q3 EPS growth.
Broadening in market leadership – SPX equal weight was +5% in Oct vs a 10% decline for NDX as 72% of stocks were risers last month. Positioning has reset lower after the significant de-grossing event through October, which means funds are in a position to plough back in. Tailwinds from buybacks are returning as the Q3 blackout comes to an end.