Mearns & Company Monday Espresso Podcast

Monday Espresso Podcast - 10th November 2025

[00:00:00] Rory Dowie: Good morning. Today is Monday the 10th of November. My name is Rory Dowie, Portfolio Manager here at Marlborough. Today I'm delighted to be joined by Andrew Shaw. Andrew is one of our Senior Investment Analysts on the team. So firstly, good morning, Andrew.

[00:00:13] Andrew Shaw: Morning Rory.

[00:00:14] Rory Dowie: So how do markets get on last week firstly?

[00:00:17] Andrew Shaw: Markets fell across the board last week, across developed markets, the US was down 2% on the S&P with a tech heavy Nasdaq down almost 3.5% by week end, which is the worst week since April and Europe was down one and a half percent. UK down slightly less only down half percent, and then out in the east we have both Japanese and Asian markets falling by round about 2%.

[00:00:43] Rory Dowie: Bit of a red week last week. And again, that follows the very strong markets we've had over the last sort of three to four months. And so probably healthy to have a bit of a pullback. Do you have any colour in terms of what was driving that pullback in markets, Andrew?

[00:00:57] Andrew Shaw: For me, some of the impacts could be from comments made by Nvidia, CEO, Jensen Wang.

[00:01:02] Andrew Shaw: If you recall the start of the year Deep Seek an AI model from China caused a big tech sell off, and that was around China being able to create advanced AI models that were cheaper to run than the US companies and Jensen was in London this week and basically said one that China is going to win the AI race.

[00:01:23] Andrew Shaw: Now we did cite two advantages that China has first being lower energy costs. China's gives massive subsidies for data centers. Which makes running these AI models a lot cheaper for them. And then there's also looser regulation in China, which Huang contrasted with the cynicism and growing regulatory hurdles in the west.

[00:01:45] Andrew Shaw: Which is at odds with China's streamlined government back push for AI development. Jensen did take to social media to then kind of soften his stance a little bit, stated that China's only nanoseconds behind America in the AI race. So it's worth caveating these comments that Jensen is amping up pressure on the US administration to allow Nvidia to export chips to China again.

[00:02:10] Andrew Shaw: His core message is clear. I mean, US export restrictions that will limit the sale of NVIDIA's chips to China, risk forcing China to develop their own and ecosystem and relying on domestic alternatives, which ultimately accelerates China's self-sufficiency and its long term competitiveness. That is at odds with what the US export restrictions are actually trying to achieve.

[00:02:38] Rory Dowie: Mm. Yeah. So as you say there, Jensen Huang, CEO of Nvidia, you know that company that makes all those AI chips, now he's amping up pressure on the US government to try and allow them to export again to China to help boost their revenues. But clearly his tatics this time, not just amping up pressure on the US government, perhaps he has been spooking markets a little bit with his comments, how advanced China are with their AI models as well.

[00:03:01] Rory Dowie: Perhaps there's some concern that China can build these things cheap again, as we saw the start of the year, so perhaps that could be one reason why markets were a little bit softer last week.

[00:03:11] Rory Dowie: Covered the kind of sell off we had last week in markets, a bit closer to home. We had an update from the Bank of England as well. What was the news there?

[00:03:19] Andrew Shaw: Yeah, the Bank of England was the epicenter of Central Bank News last week. It's MPCO. The monetary policy committee voted by a very narrow margin of five to four to keep the benchmark steady at 4%.

[00:03:30] Andrew Shaw: That was a crucial defining vote, and five members voted for a hold with a significant minority of four members, actually bought in for a 25 basis point cut. Indicates that the split decision is key is it indicates that the MPC is almost evenly divided on the need for immediate easing. Governor of Bank of England Andrew Bailey stated that while the UK inflation likely peaked at 3.8%, the MPC needs conclusive evidence that wage growth and service inflation are moderating sufficiently before it can confidently ease policy and the closeness of this vote however, does suggest that rate cut could be on the cards sooner than initially forecast with a potential early Christmas present for all those Brits from the Bank of England.

[00:04:13] Rory Dowie: Yeah, quite indeed. And I guess sort of similar sort of sentiment from what we saw the week before in the US with their rate cut there. But again, central bankers warning markets that, you know, they want to be data dependent. They need to make sure that they really have stamped out inflation before they continue with their rate cuts.

[00:04:30] Rory Dowie: So yeah, looking pretty split there in the UK and potentially getting a rate cut in December, as you said there. Finally, Andrew, you had some news on the economic data front last week. What were the kinda highlights there?

[00:04:42] Andrew Shaw: Yeah. China's economic data delivered a sobering message this week. Official figures showed that exports contracted by 1.2% year over year, which significantly missed expectations.

[00:04:54] Andrew Shaw: This persistent weakness in global demand for Chinese goods is a negative signal for manufacturing sectors throughout the globe. Imports only grew in China by 0.3%, which reflects persistently weak domestic consumption, and that's despite the government stimulus efforts. European figures provided a small positive offset.

[00:05:14] Andrew Shaw: German factory orders unexpectedly surged by 2.2%, and that was primarily driven by large orders for vehicles and machinery from outside the Eurozone. This suggests that certain industrial pockets of Europe's largest economy and better improved global supply chain and competitive exports. That provides a minor counter balance to the broader economic malay in the Eurozone.

[00:05:37] Rory Dowie: Yeah. Thanks Andrew. I think there's some, some interesting dynamics going on there. So clearly we've had a lot of tariffs at the start of this year. You know, China probably has been at the forefront of that pain from Trump's tariffs, and perhaps no surprise there that, you know, the exports from China have contracted ahead of expectations.

[00:05:55] Rory Dowie: And then actually in Europe we've seen the opposite thing happens. So orders from outside of Europe actually surge, so perhaps US companies are perhaps ordering more from Europe relative to they are China, so that would perhaps be explaining some of that data there. Lastly, what have we got to look out for this week?

[00:06:12] Andrew Shaw: Earning seasons continuing. We'll give listeners an update next week, and there's also some inflation data in the US and GDP data out in Europe.

[00:06:21] Rory Dowie: Brilliant. Thanks for joining Andrew. To all our listeners, hope you found that useful and wishing you a great week ahead.