London Quick Take – 14 August - Pound at 1-month high on GDP figs, Wall St records keep coming, attention shifts to Trump-Putin meet

The pound hit a month high after better-than-expected GDP figures, Wall Street keeps hitting record eyes and all eyes are on Trump’s meeting with Putin tomorrow.

Sterling trades at its best level in over a month as data this morning showed signs of life in the economy. UK GDP  growth was better than expected but it’s still slowing.  The economy grew by 0.3% in the second quarter, ahead of estimates. Recent data has been poor,  a particularly the bad construction PMI and cratering in payrolled employees. Yet wage growth is still strong due in large part to public sector pay deals. Inflation remains too high and growth is failing - we are into stagflationary doom loop. This would be bad enough if it were not also for the fact we face a fiscal black hole that going to mean higher taxes.

GBPUSD took out 1.3590 to narrowly eclipse the 24 July peak, hitting its best since 10 July. The pound was also trading at a one-month high against the euro, with EURGBP down through the 50-day SMA to test 0.860 support.

The FTSE 100 opened lower due to a batch of companies going ex-dividend, including HSBC, GSK, Rio Tinto, Shell, BP and Unilever among others – something like 30pts from the index from ex-divis making the index look like it’s underperforming. Elsewhere in Europe we see positive moves on the major bourses this morning.

Wall Street stretched its run with another set of record highs. The S&P 500 rose 0.3% with healthcare doing well, while the tech sector was more muted with the Nasdaq up just 0.14%. The Dow was the big gainer for the day, rising over 1% as it plays catch-up with the other two. Even more catchup for the Russell 2k, which rallied a further 2% with small caps in focus due to rate cut expectations.

US producer price inflation will be useful for signs of just how much companies are absorbing in tariff-related costs or passing on to consumers – a potential leading indicator for consumer prices and therefore the Fed and rate cut expectations.

Trump stuff

Trump assured European leaders late yesterday that there would be “very severe consequences” if Putin refuses to agree to a ceasefire at a meeting in Alaska tomorrow. I looked at potential market implications from a ceasefire earlier this week.

Export taxes are now a thing: US Treasury secretary Scott Bessent hinted at rolling out its revenue-share agreement with Nvidia and AMD to other industries. Nvidia and AMD agreed to give the US government 15% of any Chinese chip sales in return for export licences. “I think we could see it in other industries over time,” Bessent told Bloomberg. These are basically a form of tariff on exports at source.

Trump is considering 11 candidates for the role of Federal Reserve chair -  notably this includes a couple of markets guys - Jefferies chief market strategist David Zervos  and Rick Rieder, chief investment officer for global fixed income at BlackRock. Zervos is popular on the betting markets and his probability of being Trump’s guy is now about the same as that of former Fed Governor Kevin Warsh. Fed Governor Chris Waller remains the frontrunner with about a one-in-three chance according to the betting markets. 

What’s important right now is that the list is quite long and interviewing of candidates may take a fair while, which makes it less likely we have a ‘shadow’ Fed chair opposite Jay Powell for several months before his tenure ends next year – a situation that would definitely cloud the monetary policy outlook and potentially undermine confidence in US debt and the dollar. US Treasury Secretary Scott Bessent said the Fed’s rate should be 1.5 percentage points lower than where it is now. Meanwhile he also said trade officials will reconvene with Chinese counterparts within two to three months to discuss economic relations following the 90-day extension of their tariff truce.

Companies

Aviva shares rallied after earnings this morning showed a 22% rise in operating profit in the first half of the year.

Nvidia – Piper Sandler raised its price target on the stock to $225 from $180 ahead of earnings in a fortnight. The stock ended lower by almost 1% at $181.54.

CoreWeave plunged 20% after results – kicker for the insiders as the lockup expires tonight, which could add even more volatility to the stock price, which is still up about 200% from its IPO.

Taiwan’s Foxconn Q2 profits rose 27%, ahead of expectations.

Today watch Deere for tariff impacts.