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London Quick Take – 27 August – Stocks mixed ahead of key Nvidia earnings
Note: This is marketing material. This article is not investment advice, capital is at risk.
Either way Fed independence is being assailed, and this is at best problematic for the market, should create economic uncertainty and be dollar negative. But it’s never straightforward – political mess in France has seen euro longs come unstuck with the key 1.16 level coming under heavy assault. Fortunately for the long Europe/euro trade, German fiscal expansion is probably more important. Gold hit a two-week high before easing back this morning as we are broadly seeing some giveback across the piece.
European stocks, which had been dragged down by Paris and worries about the French political outlook, are trading mixed early on Wednesday. While the CAC in Paris bounced after its 1.7% drop on Tuesday, the DAX in Frankfurt was a tad lower.
In London, the FTSE 100 rallied to about 9,300, led by JD Sports, Pershing Square and National Grid. Prudential rose about 1% on a 7% rise in after-tax profit and announced $1.1bn in additional share buybacks over 2026/27. Miners slipped as precious metal prices retreated.
A new broom: Rio Tinto shares rose as it announced a restructuring of its divisions into three segments: Iron Ore; Aluminium & Lithium; and Copper, while also naming its new iron ore chief. Profits recently slumped to a 5yr low amid lower iron ore prices – new chief executive Simon Trott wants to clear the decks and lower costs.
Consumer confidence: UK retail stocks took a hit yesterday after a negative report from Deutsche Bank, which downgraded Associated British Foods, Wickes and Kingfisher, and lowered price targets on Dunelm and Marks & Spencer.
The worry is the consumer backdrop as we head into the tail end of the year. The Bank of England is worried about persistent inflation and seems set to hold rates for longer than the economy may need. Ofgem today raised the energy price cap, which won’t help. Meanwhile the ‘moron premium’ for UK rates saw the 30-yr gilt yield drift up to a 27-year high...fiscal policy is so uncertain the market does not like UK debt right now. You could argue that it’s because the Bank is hawkish, but that should push the long end down a touch. Rising UK gilt yields is not good for sterling – GBPUSD pushed down to once again test and just about hold its 20-day line at 1.3433.
US
There's still some froth around. Yesterday was the kind of day when quality companies were being sold and some of the highest beta, speculative stocks were flying. We saw the spread narrow later on though with quality catching a bid in the end to leave the major US indices higher for the day, while some of the air came out of the more speculative names.
With the market so decided that the Fed is about to cut rates, the downside from it potentially choosing to stand pat gets bigger. There is a LOT coming up over the next three weeks - Aug 27th (today) NVDA earnings, Aug 29th PCE inflation, Sep 5th nonfarm payrolls, Sep 10th PPI, Sep 11th CPI, Sep 17th FOMC meeting.
On Nvidia – expect some movement. Options market shows a roughly 6% swing in either direction for Nvidia shares after its earnings are reported tonight. This is going to be a test of resilience in the AI trade – watch for read across on Microsoft, Palantir, Amazon, and so many more names in the Nasdaq. NVDA makes up 8% of the S&P 500. Fellow tech names Snowflake and CrowdStrike are also set to report quarterly earnings after the close today.
Finally, Oklo jumped upwards of 9% before settling up 5% for the session as BofA initiated coverage on the stock with a buy rating. It’s one of the companies developing small nuclear reactors and is seen as a beneficiary of soaring AI power demands.
Key Points
- All eyes on Nvidia earnings due this evening after the market close, while Snowflake and CrowdStrike are also due to report
- French political situation needs careful monitoring for 'long Europe' trade
- US stocks shrug off Trump's attack on the Federal Reserve to post gains ahead of key three-week period
- Rio Tinto new CEO announces immediate restructuring after profits hit 5-year low
President Trump’s decision to fire Fed governor Lisa Cook provided a murky backdrop to trading yesterday. The Federal Reserve stated that its governors can only be removed "for cause," meaning this case will ultimately be decided in court. The result of all this uncertainty was steepening in the yield curve with the 2yr yield slipping to 3.66% (rate cuts coming because the highly polticised Fed will do what Trump tells it to once Powell is gone) and the 30yr backed up to 4.94%, because markets think this will mean inflation stays a lot more persistent + worries about the deficit. Watch the 5% level on the 30yr.
Either way Fed independence is being assailed, and this is at best problematic for the market, should create economic uncertainty and be dollar negative. But it’s never straightforward – political mess in France has seen euro longs come unstuck with the key 1.16 level coming under heavy assault. Fortunately for the long Europe/euro trade, German fiscal expansion is probably more important. Gold hit a two-week high before easing back this morning as we are broadly seeing some giveback across the piece.
European stocks, which had been dragged down by Paris and worries about the French political outlook, are trading mixed early on Wednesday. While the CAC in Paris bounced after its 1.7% drop on Tuesday, the DAX in Frankfurt was a tad lower.
In London, the FTSE 100 rallied to about 9,300, led by JD Sports, Pershing Square and National Grid. Prudential rose about 1% on a 7% rise in after-tax profit and announced $1.1bn in additional share buybacks over 2026/27. Miners slipped as precious metal prices retreated.
A new broom: Rio Tinto shares rose as it announced a restructuring of its divisions into three segments: Iron Ore; Aluminium & Lithium; and Copper, while also naming its new iron ore chief. Profits recently slumped to a 5yr low amid lower iron ore prices – new chief executive Simon Trott wants to clear the decks and lower costs.
Consumer confidence: UK retail stocks took a hit yesterday after a negative report from Deutsche Bank, which downgraded Associated British Foods, Wickes and Kingfisher, and lowered price targets on Dunelm and Marks & Spencer.
The worry is the consumer backdrop as we head into the tail end of the year. The Bank of England is worried about persistent inflation and seems set to hold rates for longer than the economy may need. Ofgem today raised the energy price cap, which won’t help. Meanwhile the ‘moron premium’ for UK rates saw the 30-yr gilt yield drift up to a 27-year high...fiscal policy is so uncertain the market does not like UK debt right now. You could argue that it’s because the Bank is hawkish, but that should push the long end down a touch. Rising UK gilt yields is not good for sterling – GBPUSD pushed down to once again test and just about hold its 20-day line at 1.3433.
US
There's still some froth around. Yesterday was the kind of day when quality companies were being sold and some of the highest beta, speculative stocks were flying. We saw the spread narrow later on though with quality catching a bid in the end to leave the major US indices higher for the day, while some of the air came out of the more speculative names.
With the market so decided that the Fed is about to cut rates, the downside from it potentially choosing to stand pat gets bigger. There is a LOT coming up over the next three weeks - Aug 27th (today) NVDA earnings, Aug 29th PCE inflation, Sep 5th nonfarm payrolls, Sep 10th PPI, Sep 11th CPI, Sep 17th FOMC meeting.
On Nvidia – expect some movement. Options market shows a roughly 6% swing in either direction for Nvidia shares after its earnings are reported tonight. This is going to be a test of resilience in the AI trade – watch for read across on Microsoft, Palantir, Amazon, and so many more names in the Nasdaq. NVDA makes up 8% of the S&P 500. Fellow tech names Snowflake and CrowdStrike are also set to report quarterly earnings after the close today.
Finally, Oklo jumped upwards of 9% before settling up 5% for the session as BofA initiated coverage on the stock with a buy rating. It’s one of the companies developing small nuclear reactors and is seen as a beneficiary of soaring AI power demands.