Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
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London Quick Take – 10 November - Stocks rally on US govt shutdown/reopening hopes, Diageo investors cheer Dave Lewis appointment
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
AI bubble: TSMC – the world’s largest contract chipmaker – said October revenue growth slowed to 16.9%, the weakest since Feb 2024, hinting at moderating AI demand. CoreWeave reports today, Nebius tomorrow along with Rigetti, one of the big quantum computing names.
Meanwhile check in on Japan where we have yields making new highs since 2008 as politicians weigh in on the BoJ...Japanese PM Takaichi told parliament she would extend an annual fiscal target to “several years” to allow more flexible spending and said “I hope the BOJ guides appropriate monetary policy to stably and sustainably achieve 2% inflation driven not by cost-push factors, but wage increases”. One of Takaichi’s closest economic advisors warned “it would be quite risky for the BOJ to raise interest rates in December”. USDJPY pushed up to 154 as the yen weakened.
Every little helps: Diageo shares popped 7% as investors cheered the appointment of former Tesco boss Dave Lewis as the new permanent CEO. His laser focus is going to be vital to turning things around after a years of trouble and a profits warning last week sent shares to a 10-year low. He brings strategy and execution. Huge FCF yield as discussed last week: The company expects about $3bn in free cash flow this year and to increase from this level going forward...6% FCF yield doesn’t look too bad if you think management can turnaround this around (a permanent CEO would help guide the market). It’s been a tough couple of years since Menezes died and the company has struggled to find the right leader. Tariffs don’t help either, but the key worry is around declining alcohol consumption and the impact from weight-loss drugs.
Click here for the week ahead
For more Budget coverage check our first podcast episode with BlondeMoney's Helen Thomas
Key Points
- Stocks rally on hopes of imminent end to US government shutdown
- Some easing in trade tensions also boosts risk appetite
- Nasdaq coming off its worst week since April
- Diageo shares jump on appointment of Dave Lewis as CEO
Hopes of an imminent end to the US government shutdown sent stock markets higher after a bruising week for tech amid an AI-related crisis of confidence hobbled the broader market. On Sunday the Senate voted 60-40 on a key step towards reopening. Worries about the longest shutdown in history had driven consumer confidence to its weakest level in more than three years, a whisker above its lowest ever level, data on Friday showed. A private survey meanwhile showed the largest number of October layoffs in 22 years. The deal being voted on would fund the government through to January...apart from confidence it could mean we start to get a chunk of missing economic data, which may introduce some extra volatility.
Meanwhile, the Trump administration is planning to dole out $2k 'tariff dividend' stimmy cheques...inflationary = gold positive. And keep your eye on the Supreme Court view on tariffs. Treasury yields moved higher last week as US Supreme Court justices appeared sceptical about the legal basis for Trump’s tariffs. Yields moved up because if tariffs are killed off then the Treasury would have to refund all those duties collected so far – currently running at about $30bn a month.
We’ve also got some positive noises on trade etc. China rolled back restrictions on exports of rare earth and critical minerals to the US and granted some exemptions on export controls for Nexperia chips. China and US announced yearlong suspensions of port fees that they had slapped on each other.
China inflation data seemed to stabilise amid some mixed economic data. CPI in October came in at 0.2%, year on year, against expectations of zero growth. Producer prices fell 2.1%, exports in October unexpectedly contracted, driven by a 25% decline in shipments to the US. Manufacturing activity declined more than expected.
The more risk-on mood means it’s pretty much a sea of green on the boards this morning. The FTSE 100 added about 0.7% to move within a few points of its all-time high before paring gains a touch. The DAX and CAC both added more than 1% in early trading.
In the US, stock futures are pointing to solid gains after Friday’s recovery session. The S&P 500 started the session deeply in the red before bulls staged a late rally into the close to finish 0.13% higher. The Nasdaq composite had been 2.1% lower at one point but rallied nearly 500pts off its low of the day as the 50-day SMA held to finish just 0.2% lower for the day, still posting its worst week since April however. We've now had two big wobbles in the last month - so far the trend line and 50-days are holding but it's confidence-sapping.
Meanwhile, the Trump administration is planning to dole out $2k 'tariff dividend' stimmy cheques...inflationary = gold positive. And keep your eye on the Supreme Court view on tariffs. Treasury yields moved higher last week as US Supreme Court justices appeared sceptical about the legal basis for Trump’s tariffs. Yields moved up because if tariffs are killed off then the Treasury would have to refund all those duties collected so far – currently running at about $30bn a month.
We’ve also got some positive noises on trade etc. China rolled back restrictions on exports of rare earth and critical minerals to the US and granted some exemptions on export controls for Nexperia chips. China and US announced yearlong suspensions of port fees that they had slapped on each other.
China inflation data seemed to stabilise amid some mixed economic data. CPI in October came in at 0.2%, year on year, against expectations of zero growth. Producer prices fell 2.1%, exports in October unexpectedly contracted, driven by a 25% decline in shipments to the US. Manufacturing activity declined more than expected.
The more risk-on mood means it’s pretty much a sea of green on the boards this morning. The FTSE 100 added about 0.7% to move within a few points of its all-time high before paring gains a touch. The DAX and CAC both added more than 1% in early trading.
In the US, stock futures are pointing to solid gains after Friday’s recovery session. The S&P 500 started the session deeply in the red before bulls staged a late rally into the close to finish 0.13% higher. The Nasdaq composite had been 2.1% lower at one point but rallied nearly 500pts off its low of the day as the 50-day SMA held to finish just 0.2% lower for the day, still posting its worst week since April however. We've now had two big wobbles in the last month - so far the trend line and 50-days are holding but it's confidence-sapping.
AI bubble: TSMC – the world’s largest contract chipmaker – said October revenue growth slowed to 16.9%, the weakest since Feb 2024, hinting at moderating AI demand. CoreWeave reports today, Nebius tomorrow along with Rigetti, one of the big quantum computing names.
Meanwhile check in on Japan where we have yields making new highs since 2008 as politicians weigh in on the BoJ...Japanese PM Takaichi told parliament she would extend an annual fiscal target to “several years” to allow more flexible spending and said “I hope the BOJ guides appropriate monetary policy to stably and sustainably achieve 2% inflation driven not by cost-push factors, but wage increases”. One of Takaichi’s closest economic advisors warned “it would be quite risky for the BOJ to raise interest rates in December”. USDJPY pushed up to 154 as the yen weakened.
Every little helps: Diageo shares popped 7% as investors cheered the appointment of former Tesco boss Dave Lewis as the new permanent CEO. His laser focus is going to be vital to turning things around after a years of trouble and a profits warning last week sent shares to a 10-year low. He brings strategy and execution. Huge FCF yield as discussed last week: The company expects about $3bn in free cash flow this year and to increase from this level going forward...6% FCF yield doesn’t look too bad if you think management can turnaround this around (a permanent CEO would help guide the market). It’s been a tough couple of years since Menezes died and the company has struggled to find the right leader. Tariffs don’t help either, but the key worry is around declining alcohol consumption and the impact from weight-loss drugs.
Click here for the week ahead
For more Budget coverage check our first podcast episode with BlondeMoney's Helen Thomas
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