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 - 6 August - Glencore stays put, Trump nears decision on next Fed chair
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Key Points
- Glencore profits tumble; abandons review of NY listing, commits to London
- Palantir +7%, Lemonade +30% as Wall Street pulls back after Monday's bounce
- Trump close to appointing next Fed chair
- Tariffs remain in the headlamps as China deadline approaches, Chips and Pharma sectoral tariffs eyed
Glencore is staying in London, but thousands of company directors are leaving. Rachel Reeves faces a £51bn hole in the public finances – tax hikes are coming and the UK’s debt death spiral will be complete. Expect gilts to get offered into the autumn but for now we have the Bank of England cutting rates tomorrow.
The FTSE 100 trades higher this morning with risk broadly bid across European equities. Glencore fell, whilst we had big falls from the two Coca-Cola bottlers listed in London despite apparently solid results. The US closed down yesterday after Monday’s bounce (dead cat?). I expect we are now moving from a volatility-crushing grind up to a more two-way market again. Palantir (+7.8%) and Pfizer (+5.2%) rose on earnings, while Vertex and SMCI tumbled. AMD dropped post-close on weak China data centre sales. Today’s focus shifts to earnings from Disney, Uber, McDonald’s, and Airbnb, which could all move markets.
We need to talk about Kevins
Two Kevins and two empty seats on the Fed board – at least of one of those will be appointed by Donald Trump this week and that person will be the next Fed chair. Former Fed Governor Kevin Warsh and Kevin Hassett, the National Economic Council director are in the running. “Both Kevins are very good,” Trump said.
So, we get a new Fed chair this week in all but name (Kevin?), which is going to stoke a bit of division in the Fed over the next few months. Essentially we would have a dovish shadow Fed chair sitting across the table from Powell...how do you steer expectations with that? The market has been pretty well primed for something like this to happen and we seem well priced for cuts to come down the track anyways. The key is the data, which has not been great and could get worse. But as discussed yesterday, rate cuts are not always positive for the market.
Next Tuesday is the deadline for the deal with China, and Trump says the two countries are close to agreeing extending the trade truce and easing export restrictions. Trump also warned that if the EU fails to make agreed US investments, tariffs will rise to 35%. If investments occur, tariffs will drop to 15%. No Taco.
On the stagflation/tariff story – ISM services PMI yesterday showed prices up and employment down...again goes to the point that it’s not a straight line for the Fed to walk here.
But the market is fixated on sectoral tariffs - Trump said his administration is looking to introduce tariffs on semiconductors and pharmaceuticals – levies that could eventually reach up to 250%. Trump said tariffs on semiconductors and pharma would be revealed "within the next week or so". The message from Trump’s interview with CNBC seemed to be: no Taco. He plans to start with a "small tariff," raising it to 150% and then 250% within 18 months. So neatly we turn to earnings from Novo Nordisk, AMD and Super Micro Computer.
Novo Nordisk – this stock has been walloped recently following a killer profit warning last week to trade at its weakest level since August 2021, erasing all the gains since the launch of Wegovy. The question on Novo is whether the market is right to price the company to shrink. Nothing particularly new from the earnings release – reiterating guidance of annual sales growth of 8% to 14% at constant exchange rates, along with annual operating profit growth of 10% to 16%.
AMD upped guidance and looks strong, shares all over the price though as earnings missed expectations amid some margin pressures and China-related uncertainty. Adjusted earnings per share of $0.48 slightly missed analyst expectations as US chip export controls cost $800mn. AMD raised its revenue guidance for the third quarter to approximately $8.7bn, well above analyst expectations of $8.3 billion. Meta and OpenAI are increasingly turning to AMD to reduce reliance on Nvidia.
Super Micro – much tougher quarter here and stock hit 18% after-hours.
Elsewhere, Glencore is sticking with its London listing and shares fell 4%. That is probably less about staying in London and more about the fact it posted a deeper-than-expected net loss due to taking a big impairment on its Colombian coal assets. Weak thermal coal prices have weighed on the stock but there are potential signs of a turnaround in production, led by copper. Makes key point that “the scale and pace of required resource development will struggle to meet the demand projections for such materials into the future”. Good news for the London stock market I guess.
Staying in basic resources, check the gold miners as expected downward path in rates curve, which lowers funding costs for these companies, has pushed the gold miners index to record highs. Gold prices themselves are inching back towards the $3,400/oz.
Copper prices remain on the back foot after the Trump about-turn – lots of stranded copper in the US that needs to find its way back into the market.
Caterpillar – industrial bellwether - initially fell on $1.5bn hit from tariffs but ended the session broadly flat. Adjusted earnings per share fell 21%, with operating profit down 18%.
Speculation: Lemonade jumped 30%, Oklo +9%, Quantum Computing and D-Wave Quantum both up over 8%. Palantir surged over 7% after its blowout earnings report. Retail trader favourite Opendoor fell 17% - super volatile despite the earnings beat. Snap was down 15% as revenues rose 9% but net loss of $262.6mn.
Disney. McDonald’s and Shopify are due to the report later.
Finally, Russia is weighing options for a concession to US President Trump’s demands for a ceasefire in the war on Ukraine in the form of an “air truce” that would pause drone and missile strikes. Possible read across for oil.
The FTSE 100 trades higher this morning with risk broadly bid across European equities. Glencore fell, whilst we had big falls from the two Coca-Cola bottlers listed in London despite apparently solid results. The US closed down yesterday after Monday’s bounce (dead cat?). I expect we are now moving from a volatility-crushing grind up to a more two-way market again. Palantir (+7.8%) and Pfizer (+5.2%) rose on earnings, while Vertex and SMCI tumbled. AMD dropped post-close on weak China data centre sales. Today’s focus shifts to earnings from Disney, Uber, McDonald’s, and Airbnb, which could all move markets.
We need to talk about Kevins
Two Kevins and two empty seats on the Fed board – at least of one of those will be appointed by Donald Trump this week and that person will be the next Fed chair. Former Fed Governor Kevin Warsh and Kevin Hassett, the National Economic Council director are in the running. “Both Kevins are very good,” Trump said.
So, we get a new Fed chair this week in all but name (Kevin?), which is going to stoke a bit of division in the Fed over the next few months. Essentially we would have a dovish shadow Fed chair sitting across the table from Powell...how do you steer expectations with that? The market has been pretty well primed for something like this to happen and we seem well priced for cuts to come down the track anyways. The key is the data, which has not been great and could get worse. But as discussed yesterday, rate cuts are not always positive for the market.
Next Tuesday is the deadline for the deal with China, and Trump says the two countries are close to agreeing extending the trade truce and easing export restrictions. Trump also warned that if the EU fails to make agreed US investments, tariffs will rise to 35%. If investments occur, tariffs will drop to 15%. No Taco.
On the stagflation/tariff story – ISM services PMI yesterday showed prices up and employment down...again goes to the point that it’s not a straight line for the Fed to walk here.
But the market is fixated on sectoral tariffs - Trump said his administration is looking to introduce tariffs on semiconductors and pharmaceuticals – levies that could eventually reach up to 250%. Trump said tariffs on semiconductors and pharma would be revealed "within the next week or so". The message from Trump’s interview with CNBC seemed to be: no Taco. He plans to start with a "small tariff," raising it to 150% and then 250% within 18 months. So neatly we turn to earnings from Novo Nordisk, AMD and Super Micro Computer.
Novo Nordisk – this stock has been walloped recently following a killer profit warning last week to trade at its weakest level since August 2021, erasing all the gains since the launch of Wegovy. The question on Novo is whether the market is right to price the company to shrink. Nothing particularly new from the earnings release – reiterating guidance of annual sales growth of 8% to 14% at constant exchange rates, along with annual operating profit growth of 10% to 16%.
AMD upped guidance and looks strong, shares all over the price though as earnings missed expectations amid some margin pressures and China-related uncertainty. Adjusted earnings per share of $0.48 slightly missed analyst expectations as US chip export controls cost $800mn. AMD raised its revenue guidance for the third quarter to approximately $8.7bn, well above analyst expectations of $8.3 billion. Meta and OpenAI are increasingly turning to AMD to reduce reliance on Nvidia.
Super Micro – much tougher quarter here and stock hit 18% after-hours.
Elsewhere, Glencore is sticking with its London listing and shares fell 4%. That is probably less about staying in London and more about the fact it posted a deeper-than-expected net loss due to taking a big impairment on its Colombian coal assets. Weak thermal coal prices have weighed on the stock but there are potential signs of a turnaround in production, led by copper. Makes key point that “the scale and pace of required resource development will struggle to meet the demand projections for such materials into the future”. Good news for the London stock market I guess.
Staying in basic resources, check the gold miners as expected downward path in rates curve, which lowers funding costs for these companies, has pushed the gold miners index to record highs. Gold prices themselves are inching back towards the $3,400/oz.
Copper prices remain on the back foot after the Trump about-turn – lots of stranded copper in the US that needs to find its way back into the market.
Caterpillar – industrial bellwether - initially fell on $1.5bn hit from tariffs but ended the session broadly flat. Adjusted earnings per share fell 21%, with operating profit down 18%.
Speculation: Lemonade jumped 30%, Oklo +9%, Quantum Computing and D-Wave Quantum both up over 8%. Palantir surged over 7% after its blowout earnings report. Retail trader favourite Opendoor fell 17% - super volatile despite the earnings beat. Snap was down 15% as revenues rose 9% but net loss of $262.6mn.
Disney. McDonald’s and Shopify are due to the report later.
Finally, Russia is weighing options for a concession to US President Trump’s demands for a ceasefire in the war on Ukraine in the form of an “air truce” that would pause drone and missile strikes. Possible read across for oil.
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