Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Access both platforms from your single Saxo account.
London Quick Take – 26 September – Stocks shrug off tariff noise but bond vigilantes are in driving seat
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Amazon agreed to pay $2.5 billion to settle a lawsuit filed by the Federal Trade Commission in 2023 relating to “deceptive” pricing in its Prime package.
Intel jumped 8.9% on reports it approached Apple about securing an investment.
Key Points
- European stock markets rally despite Trump's latest tariff announcement
- Sterling, euro and yen all sharply down versus the US dollar
- Global bond yields spiking on stronger-than-expected US economic data
- Wall Street falls for 3rd day in a row
Long story short: Stocks were down yesterday as US yields jumped on better eco data, new US tariffs are being digested this morning with relative ease, a looming government shutdown is a concern and indigestion of Nvidia’s $100bn ‘investment’ in OpenAI has pushed tech down.
Trump is giving markets a shake with new tariffs, which includes 100% on branded pharmaceuticals, 25% tariff on all heavy (Big!) trucks, 50% tariffs on kitchen cabinets, 50% tariff on bathroom vanities and 30% on upholstered furniture, all to take effect from 1 October.
The pharma tariffs, however, would not apply to companies building new sites in the US. Despite this AstraZeneca – which is investing $50bn in the US – fell by around 1.5% at the open on Friday before turning positive. Daimler Truck Holding fell in Frankfurt.
Trump is giving markets a shake with new tariffs, which includes 100% on branded pharmaceuticals, 25% tariff on all heavy (Big!) trucks, 50% tariffs on kitchen cabinets, 50% tariff on bathroom vanities and 30% on upholstered furniture, all to take effect from 1 October.
The pharma tariffs, however, would not apply to companies building new sites in the US. Despite this AstraZeneca – which is investing $50bn in the US – fell by around 1.5% at the open on Friday before turning positive. Daimler Truck Holding fell in Frankfurt.
The tariff news ought to add to the bearish narrative we’ve seen take hold in equity markets this week, but so far European equity markets are rising and US futures are a bit higher. Maybe weaker euro/sterling, maybe just tariff noise can be ignored? Oil prices were at their highest in almost two months, underpinning strength in Shell and BP, which are index heavyweights.
Yesterday, the FTSE 100 was down about 0.4% and the S&P 500 was 0.5% lower, extending its run of losses to three days, but finished well off its lows. Europe was off colour too.
Yesterday, the FTSE 100 was down about 0.4% and the S&P 500 was 0.5% lower, extending its run of losses to three days, but finished well off its lows. Europe was off colour too.
Stocks fell sharply after stronger-than-expected US economic data sparked a bit of a shift in Fed rate cut expectations, sending bond yields higher. Toppy markets after the record high on Monday met some indigestion of Nvidia’s $100bn ‘investment’ in OpenAI, worries about a government shutdown and then a focus on yields that spooked equity markets. Inflation data today is key – a hot print would further spook the market.
The 10yr TIPS yields shot above 1.8%, while the 10yr Treasury benchmark blew up to 4.2%. The US dollar hit a three-week high, but we saw considerable resilience in gold prices considering, stabilising after a deep sell-off in the prior session. Sterling was clobbered by the stronger dollar, with GBPUSD breaking down totally at the 50-day SMA to test the 3 September low at 1.333 – holding for now but if that goes then we could see a push below 1.33 with bears in control. EURUSD meanwhile broke down at the 20-DMA and tested its 50-DMA around 1.167. USDJPY is pushing on 150 – which can spark the BoJ to intervene, which can be negative for global liquidity.
Gilt-y pleasure
“We’ve got to get beyond this thing of being in hock to the bond markets.”
That was Labour hopeful Andy Burnham, who’s thrown his cap into the ring to become the next PM. He’s suggested borrowing an extra £40bn to build council houses and argued for a mass nationalisation programme...not stuff the bond market likes to hear.
Even saying it is interesting. It betrays the fear and loathing of the bond markets that has permeated the entire political class since the Liz Truss episode. It also betrays the scale of the challenge facing the Chancellor in sticking to her fiscal rules when no one in the party seems to think it’s worth it. I think, FWIW, there is a case to tweak the rules so the government could be more flexible and not be forced into ridiculous fine-tuning of the tax system and economy every time borrowing overshoots. But not borrow more.
Gilt yields picked up, sterling got clobbered – we should be careful here because a huge amount is on the US eco data, but it was moving prior to that, betraying how skittish bond markets are when politicians start talking about borrowing more. In fact, the move in the UK 10yr gilt was about twice that of the US 10yr Treasury.
Weak auction demand was also a factor against a backdrop of persistent economic policy uncertainty with relentless speculation about tax hikes and so forth in the Budget, which is still two months away. So, you have political uncertainty because Burnham is challenging Starmer with a nationalising agenda and chatter about bond markets and economic uncertainty because the books won’t balance. It’s not a good look for gilts and sterling. Yields are ticking up this morning again...
US economy: hotter than it looks?
Why did the Fed cut? Yesterday data showed jobless claims tumbled to 218,000, well below estimate despite fears of labour market weakness, durable goods orders bounced back and GDP rose 3.8% in the second quarter, up half a percentage point from the prior estimate on stronger-than-expected consumer spending.
Fed chairs stand up to Trump
Former Federal Reserve chairs Janet Yellen, Ben Bernanke and Alan Greenspan joined a raft of ex-Treasury secretaries and former White House economic advisors to urge the Supreme Court to stop President Donald Trump firing Fed Governor Lisa Cook as her lawsuit challenging her removal is pending. “Allowing the removal of Governor Lisa D. Cook while the challenge to her removal is pending would threaten that independence and erode public confidence in the Fed,” they said in a brief filed with the Supreme Court.
Amazon settles, Intel eyes Apple
The 10yr TIPS yields shot above 1.8%, while the 10yr Treasury benchmark blew up to 4.2%. The US dollar hit a three-week high, but we saw considerable resilience in gold prices considering, stabilising after a deep sell-off in the prior session. Sterling was clobbered by the stronger dollar, with GBPUSD breaking down totally at the 50-day SMA to test the 3 September low at 1.333 – holding for now but if that goes then we could see a push below 1.33 with bears in control. EURUSD meanwhile broke down at the 20-DMA and tested its 50-DMA around 1.167. USDJPY is pushing on 150 – which can spark the BoJ to intervene, which can be negative for global liquidity.
Gilt-y pleasure
“We’ve got to get beyond this thing of being in hock to the bond markets.”
That was Labour hopeful Andy Burnham, who’s thrown his cap into the ring to become the next PM. He’s suggested borrowing an extra £40bn to build council houses and argued for a mass nationalisation programme...not stuff the bond market likes to hear.
Even saying it is interesting. It betrays the fear and loathing of the bond markets that has permeated the entire political class since the Liz Truss episode. It also betrays the scale of the challenge facing the Chancellor in sticking to her fiscal rules when no one in the party seems to think it’s worth it. I think, FWIW, there is a case to tweak the rules so the government could be more flexible and not be forced into ridiculous fine-tuning of the tax system and economy every time borrowing overshoots. But not borrow more.
Gilt yields picked up, sterling got clobbered – we should be careful here because a huge amount is on the US eco data, but it was moving prior to that, betraying how skittish bond markets are when politicians start talking about borrowing more. In fact, the move in the UK 10yr gilt was about twice that of the US 10yr Treasury.
Weak auction demand was also a factor against a backdrop of persistent economic policy uncertainty with relentless speculation about tax hikes and so forth in the Budget, which is still two months away. So, you have political uncertainty because Burnham is challenging Starmer with a nationalising agenda and chatter about bond markets and economic uncertainty because the books won’t balance. It’s not a good look for gilts and sterling. Yields are ticking up this morning again...
US economy: hotter than it looks?
Why did the Fed cut? Yesterday data showed jobless claims tumbled to 218,000, well below estimate despite fears of labour market weakness, durable goods orders bounced back and GDP rose 3.8% in the second quarter, up half a percentage point from the prior estimate on stronger-than-expected consumer spending.
Fed chairs stand up to Trump
Former Federal Reserve chairs Janet Yellen, Ben Bernanke and Alan Greenspan joined a raft of ex-Treasury secretaries and former White House economic advisors to urge the Supreme Court to stop President Donald Trump firing Fed Governor Lisa Cook as her lawsuit challenging her removal is pending. “Allowing the removal of Governor Lisa D. Cook while the challenge to her removal is pending would threaten that independence and erode public confidence in the Fed,” they said in a brief filed with the Supreme Court.
Amazon settles, Intel eyes Apple
Amazon agreed to pay $2.5 billion to settle a lawsuit filed by the Federal Trade Commission in 2023 relating to “deceptive” pricing in its Prime package.
Intel jumped 8.9% on reports it approached Apple about securing an investment.
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