True Potential Morning Markets

Kevin Kidney, Head of Asset Allocation, looks at the bond market and government spending in both the UK and US. With the upcoming US election which is currently favouring a Trump win and his prior terms fiscal policy, we have seen a 0.6%-pt rise in borrowing cots. In the UK borrowing costs have also risen and with the government revealing their Autumn budget tomorrow, we will see the full extent of higher taxes and borrowing costs.

Paul Durrans, Investment Director, looks ahead to what will be a week full of important economic data with the US GDP, inflation and jobs reports coming in as well as corporate earnings from major tech companies such as Amazon, Apple, Google and Meta. In the UK we also have the first budget under the new leadership where a mix of greater government spending and higher taxes are expected.

This week, Kevin Kidney, Head of Asset Allocation and Matt Henderson, Portfolio Manager, look at how the bond market is reflecting the uncertainty of near term political events and how that is shaping markets. We look at the imminent UK budget and some of the press reports on potential policy and the upcoming US election which is polling at a 60% Trump victory.

Matt Henderson, Portfolio Manager, looks at the release of the Japanese PMI data which breaks down the outlook for both services and manufacturing sectors. Data indicates a slowing in economic growth ahead. We also discuss this economic data against the backdrop of an unusual shift in Japan’s economy that has seen equities return 20% over the past year.

Chris Leyland, Director of Investment Strategy, looks at US earnings season which is in full swing, with 100 companies having reported and General Motors being a stand out, having exceeded expectations for revenue and profits. In asset markets, the key area to pay attention to is Gold which just hit new highs being driven in part by tensions in the Middle East and uncertainty around the US election.

George Bell, Portfolio Manager, looks at the recent economic data coming from the US, illustrating a resilient and robust economy and how this could be shifting upcoming interest rate decisions. At the start of the month, market expectation were that there would be another 0.5% cut in November, however, these have recently shifted to a 0.25% cut.In China, further measures are being taken to stimulate the economy and ease financial conditions with a 0.25% cut to one and five-year loan prime rates.

This morning our Investment Director, Paul Durrans, previews what we can expect to happen in the markets following several corporate earnings results due this week.

There’s a high focus on the global manufacturing and housing sector, delving into the data from durable goods orders and the PMI Manufacturing Survey.

Also what will reports from Tesla, Texas Instruments, General Motors, Natwest and Lloyds bank mean for your money? Tune in to find out more.

Chris Leyland, Head of Investment Strategy and George Bell, Portfolio manager, look at the European Central Bank and their decision to continue the interest rate cutting cycle after inflation came in at 1.7%. This tracks with market expectations as the eurozone economy was showing signs of stagnating so the hope will be that reduced borrowing costs will support growth. In terms of inflation, a similar story is seen in the UK with headline inflation falling to 1.7%, below the Bank of England’s target for the first time since 2021. With a demonstrated resilience in economies and inflation coming down, we will see further rate cuts before Christmas.

Chris Leyland, Head of Investment Strategy, looks into US earning season and the positive early reports from companies with 80% of the current 50 reports beating market expectations. Morgan Stanley posted a 32% increase in profits from a year ago and US equities on a one month basis are up 4% as we’re starting to see a broadening out of the equity rally, with banks outperforming the main market by 1% over the last week. The key event this week is the European Central Bank interest rate decision where the market has an expectation for a 0.25% cut.

Sebastian Mackay, Investment Director, looks at the UK inflation figures which have came in at 1.7%, beating market expectations and giving the Bank of England a strong signal to reduce interest rates in November. Also in Europe inflation has fallen below the European Central Bank target which gives further expectations to an interest rate cut decision.