- Strength in tech sector drives US and Asian markets higher.
- Gold flirts with new records, again.
- UK GDP rose in August.
- Reeves faces £22bn shortfall, says IFS.
- Oil boosted by Saudi warning, sterling holds above $1.34.
- Nestlé to cut workforce in transformation drive.
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Wall Street and Asian markets rallied overnight, led by technology shares as optimism over AI-driven growth swelled. An earlier positive trading update from ASML was backed up by a strong earnings release by Taiwan Semiconductor Manufacturing Corporation (+3%). Other leading tech names participated in the rally, with Broadcom adding 2% and South Korea’s SK Hynix jumping almost 7%.
UK traders are less bullish, with the FTSE 100 opening 0.2% lower at 9,402 this morning. Whitbread is leading the march lower, down some 7% after a poorly received trading update from the operator of Premier Inns.
Gold is rarely out of the headlines these days and, true to form, the yellow metal hit a new record high of $4,242 per oz before retreating to just above $4,000. In European trading this morning gold is pushing up once again, currently standing at $4,225 – It’s a similar story for silver which is consolidating around $53 per oz, just below the all-time high of $53.5 that it reached on Tuesday.
The UK economy expanded in August, with GDP rising by 0.1% on the month, according to the Office for National Statistics. Growth was strongest in manufacturing, with factory output up 0.7%, while service sector activity was flat, and construction output weakened. The figures were in line with economists’ expectations and will be welcomed at the Treasury where Rachel Reeves continues to work on putting her Budget together.
Setting a Budget is never easy for any Chancellor, but the challenges facing Rachel Reeves are not getting any easier. The well-respected Institute for Fiscal Studies (IFS) has reported that it sees a £22 billion gap between the government’s revenues and expenditures that the Chancellor will need to bridge. Reeves confirmed that both tax and spending measures are under consideration in an interview with Sky News last night. Speculation is growing that the Chancellor will be forced to turn to income tax rates to balance the books.
Oil markets are a little better this morning with Brent crude futures trading 60c better at $62.49, but still far below the average level of $70.36 seen over the last twelve months. Sentiment was boosted by comments from Saudi Aramco boss Amin Nasser who told the FT that the world was facing a future supply crunch. The shale boom in the US had brought oil into abundance over the last decade or two, prompting a sharp slowdown in exploration efforts elsewhere. Nasser predicts that US production will soon peak, then decline, exposing a lack of newly discovered fields with which to replace the lost shale output.
Major currencies are little changed, with sterling holding around $1.34, the Yen is generally weaker whilst the Australian dollar is coming under pressure across the board, whilst in contrast, New Zealand Dollars are gaining on all fronts this morning.
‘Have a break, here’s your P45.’ That seems to be the latest slogan from KitKat-maker Nestlé, which has announced plans to cut thousands of jobs worldwide, some 16,000 posts amounting to around 6% of its workforce. The Swiss consumer goods giant says it needs to accelerate its transformation plans in a world that is changing around it. Cost saving targets have been hiked to as much as 3 billion Swiss francs by end 2027. The news was accompanied by a better-than-expected trading update. ‘Nestlé needs to change faster’ says newly-appointed Chief Executive Philipp Navratil, who took office only last month after his predecessor was forced to quit.”
