By - UK economy returned to growth in August – GDP +0.2%
- FTSE futures up as global stocks struggle for direction
- Nikkei at two week high – Semiconductors reflect Nvidia optimism
- 0.25% Fed cut still in sight after inflation comes in warm and jobless claims spike
- Brent crude dips to $79 per barrel
- Tesla gives fans a sneak peek at Robot taxis, vans and humans
- GDP numbers change Bank of England interest rate expectations
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE has opened down a touch, as investors digest news that the UK economy returned to growth in August. The Office for National Statistic’s estimates that real GDP grew by 0.2% after two months of stagnation. This small rebound in growth was largely expected, but the lacklustre reaction echoes global markets struggle to find a clear direction. That’s perhaps unsurprising given high levels of geo-political tension, an upcoming US election and continued concerns about growth in China.
Chinese stocks gave up some of this week’s gains overnight as traders look to Finance Minister Lan Fo’an’s scheduled Saturday press conference, where he’s widely expected to unveil additional stimulus measures. There are a range of opinions as to the potential size of any fiscal injection, ranging from anywhere between two and ten trillion yuan. The market is likely to be disappointed should the number be on the low side.
However, Japanese stocks fared a little better. The Nikkei added 250 points to hit a two-week high, helped by a strong-earnings readout for Uniqlo parent Fast Retailing and a rally in semiconductor stocks. There’s been some read across from growing speculation that Nvidia is seeing stronger than expected demand for its next generation AI processor, Blackwell. But the joy is far from universal across the industry with Samsung’s chip business said to be facing ‘testing times’ and Intel looking to spin off its troubled foundry business.
US stock futures are trading flat after all major indices lost a little ground yesterday. The Consumer Price Index for September climbed 2.4% year-on-year, a fraction higher than the 2.3% consensus forecast, but as the lowest rate in three year’s it’s not overly alarming and unlikely to derail expectations of a further 25 basis point cut in interest rates by the fed next month.
There’s been a noticeable shift in the agenda towards supporting growth, and with that in mind, officials are likely to be more concerned about rising jobless claims, which jumped 33,000 last week to 358,000. Hurricane Helene was partly to blame, and with the damage assessment from hurricane Milton now underway, there could be a further blow to the labour market.
The intensity of this year’s Hurricane season has had a material impact on oil production in the US Gulf. Brent Crude is poised to post a second week of gains but is around $1 below the $80 threshold seen earlier this week. Rising speculation about direct retaliation by Israel for this month’s missile attack by Iran is likely to give continued support to the price.”
Matt Britzman, senior equity research analyst, Hargreaves Lansdown:
“After a couple of month’s delay, Tesla finally rolled out a host of future products at its long-awaited Robotaxi event. The Robotaxi itself was expected, set to launch before 2027, but investors were also treated to a 20-seater Robovan and a close-up of Tesla’s humanoid robot, Optimus, which looks further along than many had thought. Put together, and Elon’s vision for the future of Tesla has never been clearer.
But there’s still a giant chasm between that future and where the company sits today. That gap is closing, but there wasn’t much tangible detail here to sway the minds of more sceptical analysts and investors.
Further advances in self-driving are the key to unlocking these new products’ full potential. It was interesting to hear Elon finally put a time stamp on unsupervised full self-driving as close as 2025 (in regions where regulators allow it). But we know Elon’s timeframes require a pinch of salt, and there’s still no real detail on the pathway to regulatory approval. If the autonomous element can be nailed down, which is still a decent sized if, Tesla in on a path to unlocking its full potential.”
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’August provided a bit more sunshine for the economy after the wash out in July which saw output stagnate for the second month in a row. There was a rebound in construction with building sites and repair projects seeing more activity, while an increase in manufacturing output of 1.1% helped drive up the production sector. There had been concerns that uncertainty among consumers and companies in the run up to the budget on October 30th would have dented confidence but that is not showing up in these figures yet. The mighty services sector grew by 0.1%, helped by a rise in 1.2% rise in the retail trade, although it was a bit tougher for the food and beverage trade. While this was a brighter end to the summer, the overall picture is of the economy slowing in the second half of the year. This is increasing bets for another interest rate cut in November. The financial markets are now pricing in around an 80 % chance of another reduction next month, compared to 70% before the GDP figures were released.’’
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