Market Report: Markets mixed as heat builds in US economy

FTSE 100 futures gained 20 points as investors await US PCE data, with Wall Street futures steady despite an upward GDP revision. Japanese stocks hit fresh records, Trump targeted new tariffs, and Brent crude tested $70, explains Derren Nathan, head of equity research at Hargreaves Lansdown.

Derren Nathan, head of equity research, Hargreaves Lansdown:

“The FTSE 100 looks set to reverse most of yesterday’s losses, reflecting an indecisive mood among investors. The trend’s been somewhat clearer on Wall Street, which has now seen three consecutive days of losses. Yesterday’s slip came off the back of rate cut doubts, following an upwards revision of second quarter American GDP growth to 3.8%, led by strong consumer spending and a reduction in imports.  

An unexpected fall in jobless claims was a further sign of positive economic momentum. While markets are still pricing in a strong probability of an October rate cut by the Fed, the odds have lengthened a little. When it comes to year end predictions, economists have reclaimed their seat on the fence, with the probability of the Fed Funds rate reaching a 3.50-3.75% target in December receding to around 60% from close to 75% last week.

The market’s gaze now shifts to today’s Personal Consumption Expenditure figures. Core prices in August are expected to have risen by 2.9% annually. If today’s number turns out close to or below that, it provides evidence that the robust economic data seen of late has been boosted by improved productivity rather than prices alone, which should raise investors’ spirits. The roll-out of Artificial Intelligence promises to help in that area, but whether its effects are showing up in national data just yet is hard to call.

Japan’s Topix has been testing further record highs, supported by ongoing weakness in the Yen. Financial shares also received a boost as sources close to the Bank of Japan hinted at a rate rise in next month’s meeting. Pharma stocks,,, however, retreated on fresh tariff action by Donald Trump.

In a Truth Social post, the US President announced a 100% import tax on branded or patented medicines, effective October 1^st. But there’s a big but. Firms that build drug manufacturing plants in the US are to be exempted, meaning that companies such as GSK and AstraZeneca who have laid out ambitious US investment plans are well placed to escape this heavy-handed measure.

There was more to come too in a separate social media update declaring a 25% tariff on heavy trucks, and a 50% border charge for kitchen cabinets, bathroom vanities and associated products. There’s a risk the renovations business in the US could hit a brick wall.

Brent Crude prices are trading broadly flat at around $69.5 per barrel, but remain on track for the strongest weekly gain since June. Supply concerns and geopolitical unrest are driving the narrative, but if US inflation numbers behave as expected today, then hopes for further monetary stimulus could push prices through the $70 barrier.”