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It’s the big day investors have been anticipating all year – the first likely rate cut from the Federal Reserve in 2025. It’s a question of how much, not if, says Russ Mould, Investment Director at AJ Bell.
The market expects a quarter percentage point cut in recognition of a cooling jobs market. That result could help financial markets to keep trucking along, but a half a percentage point cut could spook investors that the Fed has become more concerned about the economic outlook. Whatever the outcome, it’s feasible that Donald Trump will say the Fed is still not doing enough to lower the cost of borrowing for consumers and businesses.
Sticky inflation in the UK strengthens the argument for the Bank of England to sit on its hands tomorrow and leave rates unchanged. Markets aren’t expecting a cut at this meeting, nor the one in November. We could feasibly get a cut in December if the labour market cools and the rate of inflation eases back, but equally, the Bank of England is never one to move quickly and rates might not fall below 4% until 2026 is in full flow.
The FTSE 100 held firm at the market open, with gains in industrials, technology and real estate offset by weakness in basic materials and healthcare.
Centrica took the top spot in the FTSE risers’ list after a favourable broker note. Morgan Stanley told clients that Centrica is now one of its top stock picks after upgrading its rating on the utility from ‘equal weight’ to ‘overweight’. Investors often take notice of upgrades from the largest investment banks as they can be market-moving events.
GSK
GSK has followed in AstraZeneca’s footsteps and pledged big investment in the US. Increasing its presence should help to alleviate any new tariffs on drugs imported into the country, while it will also put GSK in Trump’s good books as the investment should create jobs.
It plays to a more worrying trend of drug companies turning their back on the UK. There have been numerous pharmaceutical giants rethinking investment plans in the UK this year, citing unappealing government incentives to build factories and labs, unfavourable pricing structures for medicines, and a high clawback rate on drugs sold to the NHS.
This week has been full of headlines declaring major US investment in the UK, predominantly around technology. Yet it’s impossible to ignore the loss of potential investment in the UK from domestic and foreign pharmaceutical companies.
The UK government might put a spin on GSK’s investment in the US as a sign of strong collaboration between the two countries, yet it’s another example of the UK life science industry missing out.
AstraZeneca
AstraZeneca took a knock after one of its asthma drugs failed in final-round testing for certain types of patients.
Phase three trials are crucial events for drug companies as it’s the last step before seeking approval from regulators to commercialise the product. Drug companies don’t always succeed, and failure typically means they go back and tweak the formula before trying again.
This is not the first time AstraZeneca’s Fasenra drug has proved ineffective in trials for patients with chronic obstructive pulmonary disease, so it must now go back to the drawing board and make further adjustments.
Barratt Redrow
The housebuilding sector is nervous about the impact of the upcoming Budget on the property market as speculation continues around how Chancellor Rachel Reeves might seek to plug the black hole in the UK’s finances.
It is notable to see Barratt Redrow voice its concern about the impact of uncertainty ahead of this fiscal event. The timing of the Budget, so late in the year, means the autumn property selling season could be plagued by people deciding to stay put until there is more clarity on taxes.
Barratt achieving its guidance on completions for the current financial year is contingent on buyer confidence coming through this period without serious impairment. Like a lot of individuals and businesses, it will be crossing its fingers ahead of 26 November.
The company’s results themselves were solid enough and didn’t contain any major surprises. Importantly, the integration of the Barratt and Redrow businesses is progressing well.
However, like much of its peer group, Barratt can only lay the foundations ahead of what it will hope are better market conditions to come, and perhaps even some support from government.
A healthy increase in the dividend is a signal of confidence and the company can lean on its robust balance sheet and healthy landbank.
Unilever
Unilever’s ownership of Ben & Jerry’s may have been fraught with controversy, but it still values the brand just as much as someone looking for a pick-me-up from a tub of ice cream after a hard day.
Ben & Jerry’s commitment to social activism has resulted in headaches for its parent and contributed to an erstwhile perception that Unilever was too focused on sustainability and other so-called ‘woke’ issues at the expense of growth and profit.
Founders Jerry Greenfield and Ben Cohen have been looking to buy the brand back as they feel the social mission behind Ben & Jerry’s has been eroded, but Unilever is refusing to budge. This is understandable given it will be an important component of the ice cream division which is due to be spun off in a matter of weeks.
The latest development in this saga, with the resignation of Jerry Greenfield, puts the spotlight back on this issue and over time it will become clear if people buy Ben & Jerry’s for its ideals or its quirky flavours and premium ingredients.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
