This week Jeremy and Gareth focus on Asia...the "Beijing Bazooka" has launched Chinese equities skywards, while Japan still holds risk for global markets. Ironically, current tensions in the Middle East might be helping markets ignore Japan for a while longer, but in Europe inflation has fallen fast, raising concerns of a slowing economic outlook.

In the UK, as well as a buoyant housing market, we have a suddenly-active set of equity markets, with plenty of deals, fundraisings and another IPO all on the radar. Progressive clients tinyBuild, Petro Matad and STV all updated this week, and the overall UK plc report-card is looking quite positive...hopefully the Budget won't deliver any negative surprises.

Just after recording this we will get the reaction to the US jobs number, some "extra spice" (as Jeremy puts it) for the end of this week, given its notorious unpredictability and high levels of historic revisions. US inflation and UK GDP are the main data points for next week proper.

-----------------

Brought to you by Progressive Equity

Jeremy and Gareth are joined this week by Alastair Stewart, Progressive's Building and Construction analyst.

The main macro surprise this week has been some rapid and arguably extreme stimulus activities undertaken by the Chinese authorities...Jeremy points out that although this has been seen as something of a "sugar rush" of good news (Chinese equities rose by almost 4%) there may be a deeper concern over what the Chinese are seeing that requires such a major set of measures.

Commodities responded well to the anticipated boost to China's economy - except oil, which has been weak and where the Saudi abandonment of a $100 per barrel target could lead to further price declines.

In the UK, the Labour government is under orders to "cheer up" and the OECD is helpful with accepting more-lax borrowing rules to fund the Green Transition. Hopefully the bad news has been delivered up-front, and the Budget at the end of October may be less painful than we've been led to believed.

Alastair describes some recent caution he's seen in past weeks and months, with housing markets reflecting some of the doom-mongering talk, as confidence has perhaps ebbed, despite reducing rates. An unusually strong summer has been followed by a muted start to the usually-stronger autumn. ISG, a major contractor in the industry has collapsed into administration, with risk that Government projects especially in prisons and schools may be impacted. Exposure to bad debts so far seems contained (as many saw this coming) but could turn into a fast-breeder issue if other contractors are brought down.

UK company news has seen a flurry of reporting - Progressive clients ZOO Digital, Van Elle, IG Design Group, Tern and Oxford Metrics all with updates, and initiation of coverage on a new client, Nexus Infrastructure. Exposure to overseas markets (especially the USA) is proving problematic with a number of economies potentially slowing. There are also risks of disappointment as strong Sterling means companies translate overseas profits into less-favourable exchange rates for UK investors.

Next week sees more news from China with some PMI data which might drive sentiment, especially given this week's stimulus news. We also have inflation data from the EU, but the main event might be USA payroll figures, with a weak expectation (130k vs last month's 142k)...if the number is weaker than that, expectations on US interest rates might decline which could provide a boost to equities.

-----------------

Brought to you by Progressive Equity

This week's podcast sees Jeremy and Gareth discuss the 50-basis point cut from the US Federal Reserve, who have previously told us that inflation is pretty much under control and the primary focus is now saving jobs (the US has a dual mandate, unlike the UK Central Bank).

But there is risk - Jeremy highlights that the last time the Fed cut rates by 0.5% in one go was (coincidentally also September 18th) back in 2007...at that time, perhaps the Fed knew some things that the rest of us didn't, but either way, the following 15 months saw the S&P halved in value under what we now know as the Global Financial Crisis. This time, we're all hoping it is different. All perhaps except Donald Trump who is saying that the Fed must think the US economy is in very bad shape...

UK inflation was static this week at 2.2%, and rates were held steady.

UK markets saw a flood of corporate reporting, which was generally on-track with expectations. Progressive had four clients with news - Springfield Properties (Scottish housebuilder) saw debt reducing and returned to paying a dividend, alongside an extension of our forecasts by another two years. Printhead specialist Xaar delivered a solid and in-line H1, with material opportunities in markets not traditionally associated with printing (coatings for EV batteries, and jewelry molds) although they are still reliant on some more-traditional product launches by customers to help deliver the second half of the year. DP Poland reported that its Domino's Pizza businesses in Poland and Croatia performed very well across their H1, with more store openings planned, happy customers and early signs that they are attracting franchisees, whose efforts and capital could further accelerate performance and improve returns. Finally, Mongolian oil & gas explorer Petro Matad may no longer be an "explorer"...their plans to move to production at the Heron field took a step closer, with a deal close to finalisation allowing product (due to begin flowing in October) to be transported, stored and then sold through a neighbouring oilfield.

Returning to the theme of a possibly-slowing US economy, UK investors were reminded of the risks by TT Electronics...their warning seemed to be operational rather than economy-induced, but clearly signals that all is not always gold across the Atlantic. Keep an eye on FX translation of US profits to Sterling - the dollar has been weakening for some time.

Next week looks quiet, with inflation and interest rates data from Japan (spoiler alert - post our recording, at 2.8% inflation was as expected, and rates were held) and US Core PCE inflation due next Friday.

This week, Jeremy and Gareth discuss the prospects for a soft or hard landing for the US economy. While bond and oil markets are pricing in a recession, other markets like gold and the yen suggest financial market stress. However, while the US inflation prints are softening, the main focus for policymakers is jobs. Equity markets are skittish and indecisive, with the AI bubble coming and going, as measured by a volatile Nvidia price, which ended up 15% over the week. On the other hand, concerns about their economic sensitivity hold back flows into value and smaller cap companies.

The economic data in the UK have not been great, but they are OK. GDP is flat for the second consecutive month, and employment data is mixed.

Ashanti's agreed £2bn offer for Centamin this week highlights the huge disparity between the price of gold and the valuation of gold miners. Evidently, the cheapest way to acquire gold reserves is via M&A rather than digging.

Gareth discusses Gamma Communication's positive financial results and its development of valuable relationships with Microsoft and Cisco. Given its growing ambition, Gamma plans to move from AIM to the main market.

Jeremy highlights news this week from Alpha Group, where founder and CEO Morgan Tillbrook announced plans to step aside in favour of Non-Executive Chairman Clive Kahn. Alpha shares weakened as Clive is not well known in public markets. However, his strong track record in the global payments and FX world with Travelex and World Pay, among others, makes him a strong candidate to take Alpha Group to the next level.

Next week, we could see a re-run of August's yen carry trade volatility with the US rate decision followed by Japan's inflation data and the BoJ's rate decision the following morning. The consequences of an unexpectedly high (>3%) Japanese CPI print could set things off again.

This week in The Market Call Jeremy and Gareth discuss the choppy start to the month of September - potentially echoing the worries at the beginning of August.

Back in August, the concerns related to a rising Yen and falling dollar, a "carry trade" that might unwind with consequent selling of US assets. This time, the worry is that although Fed Chairman Jerome Powell has told us that the main worry is no longer inflation, near-term economic data need to land in a very small "Goldilocks zone". Too strong (hot) and the economy might stoke the fires of inflation, preventing the rate cuts Jay Powell has pretty much promised; too weak and the economy is cooling fast, potentially falling towards recession territory and jeopardising the soft landing that markets have pretty much promised themselves. Markets seem worried about this too...Japanese equities have tumbled 4%, and NVIDIA has lost almost half a trillion dollars in value, in just over a week.

Relative to these global concerns, UK plc is trading quite well, even if the UK retail investor is fretting about potentially-rising taxes (especially on Capital Gains) in the October budget.

Company news includes a decent trading update from Vertu, strong H1 results from STV and Concurrent Technologies, and an interesting announcement from ASOS, including some positive uses of AI to improve operational metrics and profitability.

By the time this podcast is aired, we will know the US jobs data from Friday - [spoiler alert...Jeremy was right - the number was weak, missed the Goldilocks level, and markets fell]. Next week we will get UK unemployment data on Tuesday, Wednesday brings UK GDP and US inflation data, and an interest rates decision from the ECB on Thursday.

Brought to you by Progressive Equity.

This week’s Market Call sees Jeremy and Gareth talk mainly macro - there was very little UK stock news, but a lot going on more broadly.

Markets have had a few days to digest the comments from US Fed Chairman Jay Powell, who last week steered towards lower US rates at the Jackson Hole gathering of central bankers. The fear might have been that this could prompt new worries over the US-Japan carry trade, but so far, both debt and equity markets have been stable...essentially saying "OK, we were expecting this....now please deliver the soft landing with lower rates and stable, low inflation". The US dollar continues to slowly weaken, useful for most non-US nations.

The big corporate news of the week was the much-awaited Q2 results for NVIDIA - a doubling of revenue to $30bn (!), uplift to next-quarter guidance and a $50bn (!) share buyback all looked good, but weren't enough to stop the shares tumbling 7%. We discuss whether this means a cooling of appetite for the "Magnificent Seven" tech titans, or investor concern over the wall of spending - much of which is the others in the Mag Seven buying chips from NVIDIA...we ask whether investor worry over what could be a "winner takes all" game could bring more scrutiny on future investments.

One bright side from this shift in attitude might be that smaller (and non-US) stocks could get more attention from big investors - and once again, the UK would be very well placed to benefit.

Next week is mainly about jobs - some big US jobs data points which, although volatile and hard to predict, will hopefully show that the US economy is robust but not overheating...anything other than that would make it tricky for Jay Powell to engineer the much-anticipated soft landing.

Brought to you by Progressive Equity.

Gareth and Jeremy discuss the prospects for Jackson Hole, the chances of a rate-cutting cycle starting at the Fed in September, and whether the US is heading for a soft or hard landing.

While the markets see upside, stock market history suggests that the start of these cycles is followed by increased market volatility and corrections. The most recent examples were following cuts in 2000, 2007 and 2019.

For now, the $ is weakening, and the £ and, worryingly, the Yen are strengthening.

Gareth discusses Beeks, Zoo Digital, Watkin Jones, Petro Matad and STV in the UK. Jeremy also mentions a deal announced today by Facilities by ADF.

They talk briefly about the tragic death of tech entrepreneur Mike Lynch.

Next week is quiet but will feature the repercussions from Jackson Hole, Eurozone inflation data, and US core PCE inflation data.

Made possible by Progressive Equity.

This week’s Market Call sees Jeremy and Gareth discussing the UK outlook.

UK GDP data was up 0.6% quarter-on-quarter, showing the economy is growing, albeit slowly, and putting the UK at #3 in the G7 group - a reassuring backdrop for investors.

Meanwhile we also had inflation “down but not out”…with the figure this week showing a less-than-expected rise to 2.2%. Producer prices are showing some signs of increase at the output side, and there were slightly higher levels of inflation in terms of inputs which suggests that companies are swallowing some of the price increases. This can’t last forever, so there are a couple of warning bells longer-term for the inflation outlook.

Nevertheless, the outlook for the UK economy seems solid, and the UK markets are seeing good levels of interest from global investors. It might not feel like we’re off to the races, but at least our markets survived the recent volatility relatively unscathed when compared to other major financial centres.

Sterling remains strong, and the US dollar is gradually weakening…strange with global risks rising in both the Middle East and Europe, and potentially a sign of pressure from the central bankers. We’ll learn a lot more from the Jackson Hole meeting of those central bankers in the next week – most of all regarding rate outlooks for the USA and Japan, affecting the all-important but hard-to-quantify Yen Carry Trade, for which a small wobble rocked markets dramatically over the past fortnight.

UK company news saw regulatory approval for a major deal at Beeks, a reassuring update from CML Microsystems, but a major warning from Accesso Technology, who are seeing weak levels of customer visits at the visitor attractions/theme parks they serve.

Next week we have FOMC minutes in the USA, and Japanese inflation data which could re-focus people on the carry trade if the figure is out of line with the 2.9% expectation.

Brought to you by Progressive Equity.