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 – 29 September – Gold hits fresh record as FTSE 100 nears all-time high as GSK and AZN rise on strategic moves
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Key Points
- FTSE 100 nears record as GSK and AstraZeneca make strategic moves
- Sterling, euro and yen all sharply higher versus the US dollar as US Treasury yields slip
- President Trump to meet Congressional leaders as US government shutdown looms
- Labour Party conference begins with Chancellor Rachel Reeves due to speak
Long story short: Gold rallied to a fresh record and the FTSE 100 climbed near its all-time high early on Monday, buoyed by gains for GSK and AstraZeneca as the two pharma giants make long-term strategic moves. It's a weak dollar day which is usually good for risk.
Elsewhere, the Trump administration is said to be contemplating the imposition of tariffs on imported electronic devices, with the rate to be decided on the number of chips.
Nonfarm payrolls is the main event this week after a slate-full of US employment data coming up with the JOLTS job openings report, ADP payrolls data and weekly unemployment claims. A very weak jobs report for August sealed the deal on the Fed’s rate cut in September. But more recent data has been positive, clouding the market outlook on how many cuts the FOMC will go for this year. August saw just 22k jobs added, well below forecast, whilst the unemployment rate edged up to 4.3%. Markets expect just 39,000 jobs were added in September, with unemployment steady from the month before.
Shutdown fears: If Congress fails to pass a spending bill by midnight of 30 September, parts of the US federal government will begin shutting down. It would be the fifth shutdown of the 21st century. Donald Trump is set to meet top Republican and Democrat Congressional leaders - it 's still not clear if these talks will likely avert a shutdown.
Markets tend to look through these events, but it could be trickier this time. Spot gold hit a fresh record high above $3,800/oz and silver cleared a fresh 14yr peak while the dollar sank and Treasury yields slipped - I'm not sure sowing a 'shutdown fears' narrative - perhaps a general ennui about the debt burden in the US, de-dollarisation, the old 4D trade (debt debasement, dollar devaluation) etc, etc. Ultimately, the budget impasse holds a mirror up to longer-term concerns about fiscal deficits and unsustainable spending. Something we know all about here in Britain. Sterling jumped after hitting its weakest in two months at the end of last week, while the yen eased back from the important 150 level.
Usually, markets ignore shutdowns – most last only a few days and investors seem to take a long-term view of the situation, and the short duration of most incidents has little impact on company profits. The average length of shutdowns is eight days. In 12 of the 21 shutdowns the S&P 500 has risen during the event. It could be different this time... arguably the main annoyance could be to delay the BLS's nonfarm payrolls report, which is due on Friday. More on that below.
Pharma shakeup: AstraZeneca, sometimes the largest listed name on the London Stock Exchange, will list its shares directly in New York. It’s being billed simplification of its listing structure and will undoubtedly improve liquidity, but it’s also a bit of a knock-back for London. Shares climbed on the news - can it get the best of both worlds? It wants to improve visibility and tap the deeper markets of the US while retaining its British and Swedish DNA. I think there is probably relief that it’s not pursuing a primary listing in New York, but the decision is hardly a ringing endorsement of London. It reflects the fundamental, structural issues in the UK for the largest globally-oriented stocks - the depth and liquidity of its capital markets is falling short of what's on offer across the pond.
Meanwhile Emma Walmsley will step down as CEO at GSK after nine years in charge. Shares rose on the news by over 3% - Walmsley copped flak for years, but the stock has traded sideways for two decades and things have been improving. The business looks well positioned after some notable progress in the year or so, particularly the spin-off of Haleon and strong cancer drug sales. Tariff uncertainty should start clearing, too. Seems like both GSK and AZN are laying down some long-term markers for the future.
Shares traded higher early doors in London with the FTSE 100 up 0.7% to 9,352, led by GSK and supported by the precious metal miners, who again rallied along with gold to nudge the blue chips to withing a fraction of a record high. Meanwhile shares were broadly higher in Europe. Wall Street closed higher on Friday, ending a tough weak on a more positive note as PCE inflation printed in line. Futures are pointing higher again.
Chancellor Rachel Reeves speaks today at the Labour party conference – watch for plenty of market-soothing talk after last week’s rise in yields. Prime minister Keir Starmer refused to rule out a VAT hike...it's all about not being in hock to the markets. Check out our piece on the UK's fiscal outlook.
Markets tend to look through these events, but it could be trickier this time. Spot gold hit a fresh record high above $3,800/oz and silver cleared a fresh 14yr peak while the dollar sank and Treasury yields slipped - I'm not sure sowing a 'shutdown fears' narrative - perhaps a general ennui about the debt burden in the US, de-dollarisation, the old 4D trade (debt debasement, dollar devaluation) etc, etc. Ultimately, the budget impasse holds a mirror up to longer-term concerns about fiscal deficits and unsustainable spending. Something we know all about here in Britain. Sterling jumped after hitting its weakest in two months at the end of last week, while the yen eased back from the important 150 level.
Usually, markets ignore shutdowns – most last only a few days and investors seem to take a long-term view of the situation, and the short duration of most incidents has little impact on company profits. The average length of shutdowns is eight days. In 12 of the 21 shutdowns the S&P 500 has risen during the event. It could be different this time... arguably the main annoyance could be to delay the BLS's nonfarm payrolls report, which is due on Friday. More on that below.
Pharma shakeup: AstraZeneca, sometimes the largest listed name on the London Stock Exchange, will list its shares directly in New York. It’s being billed simplification of its listing structure and will undoubtedly improve liquidity, but it’s also a bit of a knock-back for London. Shares climbed on the news - can it get the best of both worlds? It wants to improve visibility and tap the deeper markets of the US while retaining its British and Swedish DNA. I think there is probably relief that it’s not pursuing a primary listing in New York, but the decision is hardly a ringing endorsement of London. It reflects the fundamental, structural issues in the UK for the largest globally-oriented stocks - the depth and liquidity of its capital markets is falling short of what's on offer across the pond.
Meanwhile Emma Walmsley will step down as CEO at GSK after nine years in charge. Shares rose on the news by over 3% - Walmsley copped flak for years, but the stock has traded sideways for two decades and things have been improving. The business looks well positioned after some notable progress in the year or so, particularly the spin-off of Haleon and strong cancer drug sales. Tariff uncertainty should start clearing, too. Seems like both GSK and AZN are laying down some long-term markers for the future.
Shares traded higher early doors in London with the FTSE 100 up 0.7% to 9,352, led by GSK and supported by the precious metal miners, who again rallied along with gold to nudge the blue chips to withing a fraction of a record high. Meanwhile shares were broadly higher in Europe. Wall Street closed higher on Friday, ending a tough weak on a more positive note as PCE inflation printed in line. Futures are pointing higher again.
Chancellor Rachel Reeves speaks today at the Labour party conference – watch for plenty of market-soothing talk after last week’s rise in yields. Prime minister Keir Starmer refused to rule out a VAT hike...it's all about not being in hock to the markets. Check out our piece on the UK's fiscal outlook.
Elsewhere, the Trump administration is said to be contemplating the imposition of tariffs on imported electronic devices, with the rate to be decided on the number of chips.
Nonfarm payrolls is the main event this week after a slate-full of US employment data coming up with the JOLTS job openings report, ADP payrolls data and weekly unemployment claims. A very weak jobs report for August sealed the deal on the Fed’s rate cut in September. But more recent data has been positive, clouding the market outlook on how many cuts the FOMC will go for this year. August saw just 22k jobs added, well below forecast, whilst the unemployment rate edged up to 4.3%. Markets expect just 39,000 jobs were added in September, with unemployment steady from the month before.
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