London Quick Take – 15 August - FTSE 100 notches record as markets eye Trump-Putin talks, Buffett buys UnitedHealth

The FTSE 100 hit 9,200 as mining stocks took up the baton and ran early on Friday following a third straight record close on Wall Street. Glencore, Antofagasta and Anglo American all rose 2-3% early doors as the blue chips hit a fresh record high in London as traders looked ahead to the Trump-Putin meeting with very little else on the calendar today. Chinese economic data showed a slowing but the miners rose anyways. Industrial output in China rose 5.7% last month, the slowest growth since November, while retail sales growth slowed to 3.7% from 4.8% in June. Japanese growth was better than expected, raising prospects of a rate hike as per the advice of US Treasury Sec Scott Bessent.

Wall Street shrugged off a hot producer price inflation reading to secure another record. The S&P 500 rose by the slimmest of margins, bouncing back from being down 0.4% at the lows, to notch a third straight record close, while the Nasdaq and Dow both fell slightly. A huge pop for UnitedHealth should lift the Dow later and futures are bounding higher.

Trump-Putin talks

Do we see a peace deal? Trump has signalled a tough stance and we don’t really know what Putin is thinking ever. Markets are already discounting a peace dividend and increased military spending via German fiscal expansion...is there any good news left to surprise us?

Here is BofA on the talks re oil

“Sell Alaska oil bounce: oil & natural gas (-41% since March) priced for Russia/Ukraine peace; but Trump geopolitics aims for lower energy prices for US consumer…should US-Russia cooperate in "Race for Arctic" to monopolize cheaper/safer Northern Sea Route shipping lane and exploit 15% of world's undiscovered oil, 30% of world's undiscovered natural gas, bear market in energy prices deepens.”

Fed cut?

Yesterday’s hot US PPI inflation report was instructive I think – I’ve been saying for ages that the market is way too complacent about the Fed cutting in September and the leading indicator suggests that the central point is: they are further away on inflation than they are on employment, so no cut. To be clear, this is a deeply contrary view – the market is starting to think about a 50bps cut in September and is pretty much fully discounting a 25bps cut. US PPI for July rose 0.9% MoM vs 0.2% estimate, the highest reading since March 2022. The main thing is this – PPI doesn’t include imports and the main driver was services, so tariffs are not really a factor here.

Fed officials have hardly been leaning into the September rate cut certainty that the market has implied. Chicago Fed President Goolsbee said that the labour market was “strong”, and, referring to services inflation in the CPI print, said that he wants “some more surety that that’s not going to be a persistent inflation shock.”  Atlanta Fed President Bostic said that “I still have one cut on my outlook” for this year, which is way more hawkish than 2-3 that was being priced by the market after the CPI. Yields are spreading – the gap between 2yr and 30yr US yields steepened to the widest in three years. Is it bull or bear steepening?

Tariff Worry?

Is the Trump administration worried about courts blocking tariffs? Administration lawyers sent a letter dated 11 August to the clerk of the US Court of Appeals for the Federal Circuit in Washington, D.C. warning of disastrous consequences should it rule that Trump lacks the legal authority to impose tariffs.

"Suddenly revoking the President's tariff authority ... would have catastrophic consequences for our national security, foreign policy, and economy. The President believes that our country would not be able to pay back the trillions of dollars that other countries have already committed to pay, which would lead to financial ruin [...] that could lead to a 1929-style result." 

It concludes by stating bluntly that the economic consequences would be “ruinous”.

It could certainly upend deals and newly-established conventions. Countries that have struck trade deals could unilaterally abandon them, companies that have avoided tariffs based on investing in the US could switch off the funds. It could be dire, but is it likely?

Stocks

Warren Buffett bought the weakness in UnitedHealth – a stock that has shed about half its value this year. Shares ripped 10% in the post-market trade. Buffett also sold some Apple stock and revealed a new stake in DR Horton and increased his holding of Lennar.

Intel: Bloomberg reports that the Trump administration could invest in the chipmaker.

Deere, o dear: Deere cut the top end of its forecast for net income for the 2025 financial year from $5.5bn to $5.25bn as revenues fell 9%. The stock dipped 7% yesterday.

And finally,

Here’s BofA this morning:

“S&P 500 price/book ratio at record 5.3x driven by Anything but Bonds allocation and AI boom; FX debasement (favors nominal assets), demographics (millennial/Gen Z belief wealth via stocks not real estate), global rebalancing from US to RoW consumption all “it’s different this time” candidates; if not different this time, bonds get some love, international stocks>S&P500 continue”.