Fresh data in the UK will do little to ease the Bank of England’s dilemma on . Unrevised from the initial estimate, grew by 0.3% in the second quarter, although some of this may have been due to a rush of exports prior to tariffs taking effect, as seen in many other countries, masking some underlying weakness.
Meanwhile, shop prices and food inflation remain uncomfortably high, which overall gives the central bank limited room for manoeuvre in cutting interest rates further. The impact of tepid economic growth has weighed on the more domestically focused index, although a gain of 5.9% in the year to date for the comes after a previous decline, with the index previously bottoming out in April.
For the premier index, an international exposure allied to a raft of stable and mature sectors has been further bolstered by strength in the mining and defence areas, leading to a gain of 13.5% so far this year. In early trade, the was marginally lower, with another round of weakness in the oil price weighing on BP (LON:) and Shell PLC (LON:), while Fresnillo (LON:) and Endeavour Mining (LON:) failed to react to the latest leg higher of the , with valuations becoming stretched after share price rises of 259% and 113% respectively in the year to date.
Meanwhile, US markets regained some poise despite the threat of a government shutdown, with larger tech stocks, which have been at the vanguard of this year’s strength, regaining some momentum.
Lingering concerns around the AI trade remain, ranging from whether the current levels of capital expenditure will prove to be justified to the strain the recent mega deals could put on the energy infrastructure. At the same time, however, such investment has spilled over into other sectors to the general benefit of the economy, perpetuating the debate.
was the main beneficiary of the renewed buying interest, with the likes of Nvidia (NASDAQ:), Amazon (NASDAQ:) and Microsoft (NASDAQ:) recouping some of last week’s share price losses, while other AI-related stocks such as Advanced Micro Devices (NASDAQ:) and Micron Technology (NASDAQ:) also popped higher. A separate report also noted a 29% increase in US M&A activity this year to more than $1 trillion, providing a further plank to market optimism.
Going into the final day of the quarter, the main indices are poised to have made a healthy return in the year to date, although challenges for the remainder of the year undoubtedly remain. The impending Q3 reporting season will provide a more accurate summary of exactly how the tariff regime has impacted, both in terms of any investment being delayed as well as whether companies are beginning to pass on price increases, or absorbing them.
In the meantime, the has added 8.9% so far this year, and the more technology-influenced and Nasdaq have added 13.2% and 17% respectively, all boosted by modest gains for the month of September which saw each of the indices brushing new highs. Elsewhere, the likelihood of interest rate cuts and, of late, the potential shutdown have driven some investors to the haven asset of gold, which continues its ascent and is now ahead by 46% in the year to date, constantly reaching new highs along the way.
Asian economies may be showing signs of strain under the weight of US tariffs, but the markets tell a different story. Largely driven by technology gains, the main indices have also posted notable gains this year, as both Chinese and Japanese markets each climb their own wall of worry. Movement was limited overnight following the release of data from China, revealing another decrease in manufacturing activity for the sixth consecutive month and a decline in factory output in Japan in August which fell by more than had been expected.