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 – 16 Oct - Gold hits fresh record high as Treasury yields slide, sterling rallies despite tepid UK growth
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Key Points
- Wall Street shakes off trade war concerns as big banks post strong earnings
- Gold makes fresh high as US front-end yields sink to three-year low
- Sterling rises to one-week high against broadly weaker dollar despite tepid UK growth
- AI narrative remains in tact with strong results from TSMC
Can you set a price floor for stocks, too, Scott? US Treasury Secretary Scott Bessent said the White House would move to set price floors in some industries to combat China’s non-market economy. Seeing again the flexing of the administration to use industrial policy as a tool to drive its wider economic and trade agenda.
Bessent it wouldn’t consider stock market volatility when dealing with China on trade. Those kinds of comments have in the past left markets on edge – no Trump put. But not yesterday – the S&P 500 rallied 0.4% as it climbed not just the wall of worry but also its 20-day SMA. Bessent also pushed back against a report that China is “betting that the U.S. economy can’t absorb a prolonged trade conflict” with Beijing.
The long and short of this is that Bessent said that the US could back down on raising tariffs again on 1 November if China suspends its plans for rare earth export controls. Bloomberg reported that the G7 countries are planning a coordinated response to China’s rare earths policy. A Trump-Xi meet is scheduled for later this month ahead of the tariff deadline.
Monster Q3 earnings from the big banks on Wall Street supported the mood. Bank of America and Morgan Stanley joined the party started by Goldman Sachs, Citi and Wells Fargo on Tuesday. The numbers are kind of incredible and should maybe change the way people price banks? I’m not sure, but the indications were positive for the US economy, helping small caps - the Russell 2k hit an all-time high though the Dow Jones was basically flat as Honeywell and Travelers weighed. Bank earnings indicate no worries from trade wars (we were here in April, remember...), though the Fed’s Beige Book shows businesses are starting to pass on price hikes to consumers.
Nuclear stocks were volatile after the U.S. Army launched a programme to deploy small reactors. Shares of NuScale, a small reactor developer, soared 17%. Oklo and Nano Nuclear first jumped then closed lower. Investors have been speculating heavily on these names despite none actually deploying a reactor yet.
Elsewhere, AI and chips are still building a positive narrative, even if it looks like a bubble. TSMC profit jumped 39% to beat estimates and hit another record on AI chip demand. CoreWeave rose a further 4% a partnership with Poolside to provide more than 40,000 Nvidia GPUs to bolster the development of Poolside’s AI models. ASML reported bookings 10% ahead of estimates, offsetting some weakness in China.
The UK economy registered tepid growth in August. So what’s new? Working hard to stand still – wages are growing at 4+%, inflation at 4% and the economy can barely do 1%...it’s not enough. (deploy usual caveat about noisy monthly GDP figs...)Sterling is on the front foot against the US dollar though, with the greenback offered again as Treasury yields slip. The 2yr Treasury note yield is fliting with three-year lows at 3.5% as markets see trade turmoil and recent Fed commentary as quite dovish. Gilt yields are pulling lower on the gravity - comments from British chancellor Reeves on tax hikes yesterday may have soothed some concerns in the gilt market also. GBPUSD rallied to a one-week high at 1.3440, retracing a touch to find support on its 20-day moving average at 1.3420.
The FTSE 100 was a touch weaker in early trade on Thursday, pulling back to the 9,400 round number support. We have 5pts from ex-divis, while Whitbread led the declining stocks with a fall of 8% after it reported fall in sales and profits. This hit Intercontinental Hotels Group in the read across. Croda, Centrica and Spirax led the advancing stocks this morning. European indices were also trading lower on Thursday morning.
Another day, another record high for gold. Declining nominal US yields and weaker USD provide some support but neither have been important for the rally. The Fed’s Beige Book seemed to open the door for an October rate cut. We might still get the CPI in time – but the Fed report also pointed to growing price pressures. Fed chair Powell acknowledged the decline in payrolls this week. That might be a wrong way to look at it, but it’s where we are.
Finally, is this the end of the black cab? Google’s autonomous ride-hailing service, Waymo, is coming to London next year. It’s the second international launch outside of the US after Tokyo.
Bessent it wouldn’t consider stock market volatility when dealing with China on trade. Those kinds of comments have in the past left markets on edge – no Trump put. But not yesterday – the S&P 500 rallied 0.4% as it climbed not just the wall of worry but also its 20-day SMA. Bessent also pushed back against a report that China is “betting that the U.S. economy can’t absorb a prolonged trade conflict” with Beijing.
The long and short of this is that Bessent said that the US could back down on raising tariffs again on 1 November if China suspends its plans for rare earth export controls. Bloomberg reported that the G7 countries are planning a coordinated response to China’s rare earths policy. A Trump-Xi meet is scheduled for later this month ahead of the tariff deadline.
Monster Q3 earnings from the big banks on Wall Street supported the mood. Bank of America and Morgan Stanley joined the party started by Goldman Sachs, Citi and Wells Fargo on Tuesday. The numbers are kind of incredible and should maybe change the way people price banks? I’m not sure, but the indications were positive for the US economy, helping small caps - the Russell 2k hit an all-time high though the Dow Jones was basically flat as Honeywell and Travelers weighed. Bank earnings indicate no worries from trade wars (we were here in April, remember...), though the Fed’s Beige Book shows businesses are starting to pass on price hikes to consumers.
Nuclear stocks were volatile after the U.S. Army launched a programme to deploy small reactors. Shares of NuScale, a small reactor developer, soared 17%. Oklo and Nano Nuclear first jumped then closed lower. Investors have been speculating heavily on these names despite none actually deploying a reactor yet.
Elsewhere, AI and chips are still building a positive narrative, even if it looks like a bubble. TSMC profit jumped 39% to beat estimates and hit another record on AI chip demand. CoreWeave rose a further 4% a partnership with Poolside to provide more than 40,000 Nvidia GPUs to bolster the development of Poolside’s AI models. ASML reported bookings 10% ahead of estimates, offsetting some weakness in China.
The UK economy registered tepid growth in August. So what’s new? Working hard to stand still – wages are growing at 4+%, inflation at 4% and the economy can barely do 1%...it’s not enough. (deploy usual caveat about noisy monthly GDP figs...)Sterling is on the front foot against the US dollar though, with the greenback offered again as Treasury yields slip. The 2yr Treasury note yield is fliting with three-year lows at 3.5% as markets see trade turmoil and recent Fed commentary as quite dovish. Gilt yields are pulling lower on the gravity - comments from British chancellor Reeves on tax hikes yesterday may have soothed some concerns in the gilt market also. GBPUSD rallied to a one-week high at 1.3440, retracing a touch to find support on its 20-day moving average at 1.3420.
The FTSE 100 was a touch weaker in early trade on Thursday, pulling back to the 9,400 round number support. We have 5pts from ex-divis, while Whitbread led the declining stocks with a fall of 8% after it reported fall in sales and profits. This hit Intercontinental Hotels Group in the read across. Croda, Centrica and Spirax led the advancing stocks this morning. European indices were also trading lower on Thursday morning.
Another day, another record high for gold. Declining nominal US yields and weaker USD provide some support but neither have been important for the rally. The Fed’s Beige Book seemed to open the door for an October rate cut. We might still get the CPI in time – but the Fed report also pointed to growing price pressures. Fed chair Powell acknowledged the decline in payrolls this week. That might be a wrong way to look at it, but it’s where we are.
Finally, is this the end of the black cab? Google’s autonomous ride-hailing service, Waymo, is coming to London next year. It’s the second international launch outside of the US after Tokyo.
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