Morning Note: Market news and an update from Proctor & Gamble.

Market News

US Treasury Secretary Scott Bessent said on Sunday he had reached a “substantial framework” with Chinese Vice Premier He Lifeng, which will be discussed when their respective leaders meet later this week. The talks covered a wide range of issues, including, export controls, tariff suspensions, fentanyl-related tariffs, and agricultural trade.

Equity markets continued to moved higher on the trade news. In Asia this morning, the Nikkei 225 rose 2.5% to above 50,000 for the first time. Investors are looking ahead to tomorrow’s meeting between new PM Sanae Takaichi and President Trump. Elsewhere in Asia: Hang Seng (1.0%); Shanghai Comp (1.1%). The futures market is currently expecting the S&P 500 to rise 0.8% at the open this afternoon. The FTSE 100 is 0.1% higher at 9,466.

Gold fell back to $4,060 an ounce, extending Friday’s decline, as demand for safe-haven assets dampened. The 10-year Treasury yield creep back above 4%. Brent Crude moved above $66 a barrel, hovering at its highest level in over two weeks, as the prospect of a trade deal lifted the energy demand outlook.

Investors are looking ahead to major central bank decisions this week, with the Federal Reserve widely expected to cut rates by 25bps following softer-than-expected US CPI data, while the European Central Bank and the Bank of Japan are seen likely to hold their policy rates steady.

On the corporate front, five of the most important companies in the world will report this week in a two-day rush of data. When Alphabet, Meta and Microsoft report on Wednesday, and Apple and Amazon on Thursday, investors will be looking for evidence of whether the companies are able to maintain positive cash flow despite huge levels of capital spending.

Sterling trades at $1.3324 and €1.1485. Softer-than-expected inflation update saw markets price in a rate cut before year-end and was the catalyst for further Gilt outperformance, along with speculation on fiscal policy after a rise in public sector borrowing. The 10-year yields 4.45%.

Source: Bloomberg

Company News

Last Friday, Proctor & Gamble released results for the three months to 30 September 2025, the first quarter of its financial year to 30 June 2026. Performance was slightly better than the market forecast and guidance for the full year was reiterated. In response, the shares were unchanged.

P&G is a global consumer goods company with annual sales of $84bn across a broad range of iconic brands including Gillette, Crest, Ariel, Head & Shoulders, and Pampers. The focus is on daily use categories. The group generates around half of its sales in North America, a fifth in Europe, and the remainder in emerging markets. In June 2025, the company announced a portfolio and productivity plan to focus its portfolio and organisation to improve its cost structure and competitiveness. 

In the three months to 30 September, net sales rose by 3% to $22.4bn, a touch above the market forecast of $22.2bn, against a challenging economic and geopolitical backdrop.

Organic growth, which excludes the impact of acquisitions, disposals, and negative currency movements, was up 2% in the quarter. Growth was driven by a 1% increase in pricing and 1% benefit from mix. Volume had a neutral impact.

However, growth was broad-based, with 8 of 10 product categories growing organic sales, better than the 7/10 in the previous quarter. Global aggregate value share was 30 basis points down on the prior year, with 24 of the group’s top 50 category/country combinations holding or growing share in the quarter.

The group operates across five divisions:

·       Fabric & Home Care (35% of full-year sales) was flat in organic terms.

·       Baby, Feminine & Family Care (23% of sales) was also flat.

·       Beauty (19% of sales) rose 6%, driven by innovation-driven growth in personal care.

·       Health Care (15% of sales) was up 1%, driven by personal health care products.

·       Grooming (8% of sales) increased by 3% as a result of innovation-driven pricing.

On a currency-neutral basis, the core gross margin fell by 30 basis points in the quarter to 52.0%, driven by gross productivity savings and higher pricing, more than offset by unfavourable costs from tariffs and commodity, unfavourable product mix, and product reinvestments. The operating margin rose by 40 basis points to 26.7%. Core EPS increased by 3% at constant currency in the quarter to $1.99, above the market forecast of $1.90.

Adjusted free cash flow was $4.9bn and adjusted free cash flow productivity was 102%, above the 90% target. The group ended the quarter with net debt of $24.8bn and returned over $3.8bn of cash to shareholders through dividends ($2.55bn) and share repurchases ($1.25bn). The group has increased its dividend for 69 years in a row.

For the financial year to June 2026, the group still expects to deliver organic sales growth of flat to +4%, including a growth headwind of 30 to 50 basis points from brand and product form discontinuations. Core EPS is expected to grow in the range of flat to +4% versus FY2025 core EPS of $6.83. The company expects free cash flow productivity of 85%-90% and to pay around $10bn in dividends and to repurchase $5bn of shares in the year.

Source: Bloomberg