Gold at record highs on rate cut bets

General market commentary

European shares closed slightly higher on Monday, with the STOXX 600 up 0.17% at 551.07, led by gains in defence and aerospace equities. Rolls-Royce, Rheinmetall and Hensoldt advanced after reports that Europe is preparing detailed plans to send troops to Ukraine, while BAE Systems rose following a major UK-Norway frigate deal. Novo Nordisk also supported the healthcare index after data showed its weight-loss drug Wegovy offered stronger heart-protective benefits than Eli Lilly’s rival therapies. With US markets closed for Labour Day, trading volumes in Europe were relatively subdued.

Market gains were capped by a rise in long-dated euro zone bond yields, with Germany’s 30-year yield hitting a 14-year high before easing slightly, weighing on utilities. Trade policy also remained in focus as a US court ruling left most of Donald Trump’s tariffs in place until mid-October, while Goldman Sachs raised its 12-month STOXX 600 target to 580. Orsted gained after securing backing from Equinor for its $9.4 billion rights issue, while euro zone manufacturing activity showed growth in August for the first time since mid-2022. Investors now turn to US jobs data later this week, which could shape expectations for the Federal Reserve’s September policy decision.

Latest market and economic update

Asian equities traded in tight ranges on Tuesday as uncertainty over US tariffs and interest rate cuts kept investors cautious after Monday’s holiday closure on Wall Street. Japan’s Nikkei rose 0.3% and South Korea’s KOSPI outperformed with a 0.7% gain, while Chinese markets slipped on weak PMI data. Australia’s ASX 200 fell 0.3% ahead of GDP figures.

US equity futures were steady overnight as markets reopened after the holiday weekend, with September’s historically weak trend weighing on sentiment. Investors also digested a court ruling declaring most of Donald Trump’s tariffs unlawful and concerns over Federal Reserve independence. In August, the Dow, S&P 500 and Nasdaq all posted modest gains.

The US dollar index climbed above 97.8 this morning as traders returned from the holiday break and looked ahead to key labour market data, with Friday’s payrolls release in sharp focus. Despite pressure from rising bets on Fed rate cuts, the greenback held firm, leaving the euro slightly weaker at USD 1.1695.

Oil prices held steady in Asian trade on Tuesday, with Brent at $68.33 and WTI at $64.81 per barrel, as supply risks from Russia-Ukraine airstrikes balanced rising OPEC+ output. Traders also eyed the upcoming OPEC+ meeting and awaited US nonfarm payrolls, which could influence Federal Reserve rate cut expectations and broader commodity demand.

Gold prices hit a record high on this morning in Asia, with spot gold reaching $3,508.54 an ounce, supported by persistent bets on US interest rate cuts and uncertainty over President Trump’s trade tariffs. A weaker dollar in general, further boosted the yellow metal, with markets pricing in an 85% chance of a September Fed rate reduction.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

China’s outstanding margin financing hit a record 2.29 trillion yuan ($320 billion), as investors increased leveraged bets amid a liquidity-fuelled share rally. While boosting market gains, higher leverage raises the risk of volatility. Analysts note the rally is driven by optimism in AI and tech, with overall valuations still considered reasonable despite stretched sentiment.

Norway chose the UK for its largest military purchase, acquiring Type 26 frigates from 2030. The deal with BAE Systems ensures compatible vessels for joint operations, strengthens NATO security, and includes industrial cooperation with Norwegian firms. The frigates will carry anti-submarine helicopters and unmanned systems.

Shares of Novo Nordisk rose almost 2% after a real-world STEER study data showed its obesity drug Wegovy (semaglutide) 2.4 mg reduced major cardiovascular events more than Eli Lilly’s tirzepatide. Continuous Wegovy users saw a 57% lower risk of heart attack, stroke and death, highlighting cardiovascular benefits despite short follow-up and study limitations.

Nestle abruptly dismissed CEO Laurent Freixe for failing to disclose a romantic relationship with a subordinate, appointing Philipp Navratil, former head of Nespresso, as his successor. The sudden exit, a year after Freixe took over, comes amid a challenging consumer environment and trade tensions, raising questions over the company’s mid-term direction and governance scrutiny.

Tesla’s European sales fell for the eighth consecutive month in August, with sharp declines in France, Denmark and Sweden. Competition from Chinese EVs, ageing models, Musk’s polarising politics, and a strong secondhand market have eroded brand loyalty and market share across the region.

Audi may aim for long-term annual sales of at least 2 million cars, up 20% from 2024, under a new strategy expected later this year. The plan relies on stronger U.S. sales despite high import tariffs, with potential local production considered. For 2025, Audi targets 1.7–1.8 million vehicles following last year’s 11.8% decline.

Mizuho raised Alibaba’s price target to $159 with an “outperform” rating, citing stronger-than-expected core commerce and cloud growth. Analysts highlighted rising advertising yields, higher transaction frequency, and surging demand for generative AI. Commerce revenue grew 10% in Q2, while Taobao’s monthly active users rose 20%, supporting an upgraded FY2028 EBITDA outlook.

Morgan Stanley downgraded Lam Research to underweight, citing expectations that its recent outperformance may not continue into 2026. While shipments and revenue have exceeded estimates, growth is expected to moderate as NAND demand cools and China slows. A $92 price target reflects limited upside, with Lam likely to lag larger semiconductor equipment peers.

Deutsche Bank upgraded Société Générale to “buy” from “hold,” raising its target price to €63, citing improving profitability despite political uncertainty in France. Analysts forecast rising returns on tangible equity and strong capital returns, with CET1 above 13%. The bank sees Société Générale as undervalued versus peers, though it continues to prefer BNP Paribas for diversification.

J.P. Morgan placed Tesco on Positive Catalyst Watch, reiterating an “overweight” rating and raising its price target to 450p. Stronger-than-expected earnings momentum and margin visibility supported upgrades to EPS forecasts for 2026 and 2027. Analysts highlighted projected operating profit of £3.2 billion and steady market share gains ahead of the October half-year results.

Upcoming data and events

Today’s economic focus is on U.S. Manufacturing PMI and ISM Manufacturing PMI, providing insights into industrial activity and business sentiment, with the earnings calendar remains light.

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