Rising UK growth and output in August has helped drive GBP outperformance. Meanwhile, commodity stocks remain a major focus, with nuclear a potential solution as a lack of fossil fuel investments bring near-term shortfalls and rising prices.  

  • European markets on the rise, but miners drive FTSE underperformance. 

  • Energy at the forefront, with rising prices bringing greater focus on nuclear.

  • UK growth on the rise, helping to lift the pound. 

A mixed affair for European markets this morning, with the FTSE 100 lagging its mainland counterparts as commodity stocks head lower. The recent rise in iron ore prices has helped lift sentiment for some of the mining majors, with hopes building that we could be on the cusp of another recovery. However, the Chinese commodity demand story remains uncertain for now, with factory shutdowns dampening demand for iron ore just as easing lockdown restrictions brought hope of an uplift. Iron ore dependant miners such as Rio Tinto, Anglo American, and BHP Group remain at risk of a volatile time as traders seek to ascertain exactly how much these Chinese energy curbs will dampen industrial production.  

Energy remains a critical issue for markets, with the world clearly caught in a predicament where declining investment in fossil fuels coincides with rising demand and a lack of output from renewable sources. Renewable energy provided just 12% of the energy mix in 2020, with fossil fuels accounting for 80%. Thus, while investors and policy-makers will be averse to new investment into an unfashionable business, there is a clear gap between renewable supply and overall energy demand that needs to be bridged quickly. Nuclear does provide one area of opportunity as an efficient energy source with low emissions, with the new Japanese PM keen to restart their nuclear facilities in the face of a growing energy crisis. Ultimately while other nations are sceptical about growing their nuclear footprint, the recent spike in natural gas, coal, and crude prices highlight the need to ramp up alternate energy output to match growing demand.  

A raft of economic data out of the UK has provided a somewhat mixed outlook for economic growth. August saw a welcome return to growth for the UK, with the July figure revised down into the first negative reading since February (-0.1%). Gains for the pound highlight a feeling of optimism, with rising growth, industrial production and manufacturing production all pointing in the right direction. That helps to build on yesterday’s jobs report, which similarly shows progress as unemployment and the claimant count continue to fall.  

Ahead of the open we expect the Dow Jones to open 52 points higher, at 34,430. 

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