Morning Note: Market News and updates from Visa and Glencore.

Market News

Donald Trump said he expects to lower tariffs the US imposed on Chinese goods over the fentanyl crisis and speak with Xi Jinping about Nvidia’s Blackwell AI chip. Both leaders are in South Korea for the APEC summit.

10-year Treasury yields remained below 4%, while gold continued to rise off its recent low and currently trades at $4,015 an ounce. Brent Crude fell back to $64 a barrel as traders grew increasingly concerned about a supply glut following signals from OPEC+ that it may raise output again.

US equities rose again last night – S&P 500 (+0.2%); Nasdaq (+0.8%) – as investors await the Fed’s rate decision and mega cap tech earnings. PayPal rose after signing a deal with OpenAI to become payments wallet in ChatGPT. Visa (see below) was unchanged on its report. In Asia this morning, markets were also firm: Nikkei 225 (+2.2%); Shanghai Composite (+0.7%). Scott Bessent said Japan’s willingness to give the Bank of Japan policy space is key, fuelling rate-hike bets.

The FTSE 100 is currently 0.3% higher at 9,717, while Sterling trades at $1.3210 and €1.1360. UK press reported Chancellor Reeves is facing a bigger than expected downgrade to productivity forecasts, which would increase size of fiscal gap. Reeves has already confirmed November’s budget would include both tax rises and spending cuts.

Artificial intelligence has sparked a nuclear reaction. Japan is backing an $80bn plan to build nuclear power plants alongside the US government using technology from Westinghouse Electric, the storied company now jointly owned by Brookfield Asset Management and Cameco (whose shares rose 22% last night). 

Source: Bloomberg

Company News

Yesterday evening, Visa released results for the three months to 30 September 2025, the final quarter of its FY2025 financial year. The numbers were slightly better than expected, driven by continued healthy consumer spending and strong growth from innovative new products and services. The company also initiated guidance for FY2026, targetting earnings growth of low double digits. In response, the shares were little changed after-hours.

Visa is the world’s largest electronic payments network. It connects 14,500 financial institutions, 130m merchant locations, and 4.9bn cards. Visa is not a bank; it doesn’t lend or take on credit risk. It doesn’t issue cards or place the terminals at the merchant locations. Instead, the company earns a small fee from more than 230bn transactions processed on its network to generate annual revenue of $40bn. The company is increasingly evolving into ‘Visa-as-a-Service’ which involves unbundling Visa’s product set to support more customers in more ways across its service stack.

Visa is still benefiting from the ongoing shift from cash and cheques to electronic means of payment, and the growth of online retail, contactless, and mobile payment systems. In emerging markets, a lack of physical communication infrastructure traditionally provided a barrier to payments growth, but that has been removed by the emergence of mobile phone technology and a government focus on digitalising cash to reduce the black economy. Finally, there is an opportunity for Visa’s trusted network in agentic commerce where autonomous AI agents act on behalf of consumers to discover, compare, and purchase products or services.

In Consumer Payments, Visa estimates a total market of $41tn worldwide, with 56% ($23tn) still available to be served, including $11bn cash and cheque. The company has six areas of focus including: “tap to everything”, token technology, cross-border, affluent consumers, A2A (account to account payments), and credit. Since 2020, the number of Visa tokens has increased from 1bn to 15bn, with adoption led by ecosystem benefits including 5% higher authorisation rates and 30%+ lower fraud.

Growth in Commercial & Money Movement Solutions (CMS, formerly known as ‘new flows’) is expected to outpace the Consumer Payments business over the long term. The company believes the total addressable market of the opportunity is massive – $145tn in B2B payments and $55tn in disbursements/payouts/P2P. Even though yields for these new flows are lower than Consumer Payments, on average, the business utilises Visa’s existing infrastructure and takes advantage of the company’s massive scale and fixed operating costs, resulting in higher margins.

The group’s third growth engine is Value Added Services that help its clients and partners optimise their performance, differentiate their offerings, and create better experiences for their customers. The company estimates the total addressable market at $520bn, meaning only 2% has been penetrated so far. Many of Visa’s largest clients now use more than 20 value-added services, such as cybersecurity, fraud, advisory services, identity solutions, data analytics, and AI, all of which enhance the group’s competitive advantage.

During the three months to 30 September 2025, Visa saw continued healthy consumer spending. Trends were strong across key metrics: payments volume (+9% in constant currency, with debit up 9% and credit up 9%), processed transactions (+10% to 67.7bn), and cross-border volume growth (which includes a lot of e-commerce as well as travel, +12%).

Net revenue grew by 11% on a constant currency basis in the quarter to $10.7bn, a touch ahead of the market forecast of $10.6bn and the company guidance for growth in the high-single-digit to low-double-digit range. For the full year, revenue grew by 12% to $40bn, versus guidance for low double-digit growth.

Q4 revenue was made up of service revenue (based on prior-quarters payment volume, +10% to $4.6bn); data processing (+17% to $5.4bn); international transaction revenue (+10% to $3.8bn); and other revenue (+21% to $1.2bn). Client incentives, a contra-revenue item, were up 17% to $4.2bn. On the call, the company highlighted value added services rose by 25%, while Visa Direct increased by 23%.

The group continued to keep a tight rein on costs, with AI driving increased productivity – operating expenses were up 13% in the quarter, primarily driven by increases personnel, general and administrative and professional fees. Adjusted EPS was up 10% on a constant currency basis, to $2.98, in line with the market expectation of $2.97 and company guidance for growth in the high single digits. Full-year EPS rose by 15% to $11.47, better than the company guidance for low teens growth.

During the quarter, Visa generated $5.8bn of free cash flow. The group’s balance sheet remains strong, with cash, cash equivalents, and available-for-sale investment securities of $20bn at the end of September. The main capital allocation priority is to invest to grow the business, both organically and via acquisition. Visa also has an ongoing commitment to return excess cash to shareholders. The group has a record of strong dividend growth, with the latest quarterly payout raised by 14% to $0.67. During the quarter, the company also bought back $4.9bn of its stock as part of its $30bn authorised programme.

On the regulatory front, the US Department of Justice (DOJ) has filed a lawsuit accusing Visa of violating antitrust law by suppressing competition in debit card processing by threatening merchants with high fees and paying off potential rivals. Visa will fight the claims, which it calls meritless. Although the company is likely to be forced to alter some of its business practices, we believe its strong (secure and reliable) network will help it to defend its 60%+ market share. We also believe that in the absence of a settlement, it is likely to take several years for the decision/appeal process to reach a conclusion. Visa has a long-term track record of coping with regulatory challenges and has flexibility in its cost base to mitigate any bottom-line impact.

Overall, we believe the long-term growth prospects for Visa remain attractive, more so given the acceleration in recent years in the shift to e-commerce, tap-to-pay, and new digital payments, and in the number of acceptance points at SMEs. In addition, the broad application of digital payments by businesses and government agencies provides a huge market opportunity. At its last Investor Day, the company provided a longer-term revenue growth framework: Consumer Payments at 5%-7% and Commercial & Money Movement Solutions/Value Added Services at 16-18%, with the latter moving from a third to a half of revenue over time. This implies total net revenue growth of 9%-12%.

The company issued new guidance for the financial year to 30 September 2026: revenue growth and EPS growth on a constant dollar basis are both expected to be in the low double-digits. For the current quarter, the company expects to generate revenue growth in the ‘high end of low double-digit’ and EPS growth in the ‘low teens’.

While some short-term economic uncertainty persists, the group remains confident in its ability to execute its strategy and expand Visa’s role at the ‘centre of money movement’. That said, a slowdown in overall consumer spending could be a drag on volumes, although spending across the network is very diversified, be it credit vs. debit, domestic vs. overseas, discretionary vs. non-discretionary spend, and low vs. high ticket spend. However, the company has previously said that if we do go into a recession, Visa is now stronger in debit – the card of choice in tougher times – than it was in the 2008/09 financial crisis. The group also highlights that if there is a downturn, they have plenty of flexibility on costs and client incentives. Note also that half of the group marketing spend is variable.

Source: Bloomberg

Glencore has released its Q3 2025 production report which highlights maintained full-year production guidance and marketing profitability in the middle of the target range. Having been heavily oversold earlier in the year, the shares have rallied of late, helped in part by a bounce in the copper price and news of additional cost cutting. The next event is the Capital Markets Day on 3 December. In response to today’s update, the shares are up 6% in early trading.

Glencore is a vertically integrated commodities business, with a strong position in the production of copper, coal, nickel, zinc, cobalt, and precious metals, and a unique marketing business which markets and distributes commodities sourced from internal production and third-party producers to industrial consumers. The group’s strategy is to own large-scale, long-life, low-cost Tier 1 assets.

Glencore is a leading producer of metals that are used in low-carbon and carbon-neutral technologies, such as electric vehicles and renewable energy, the outlook for which is underpinned by robust demand and persistent long-term supply challenges. The IEA estimates that by 2040 the metals requirement for clean energy technologies will amount to at least 2x more copper than in 2020 and 20x-25x more nickel and cobalt. Given the industry’s supply constraints, the group is also increasing its investment in recycling and circularity.

Glencore also owns a 77% interest in Teck’s steelmaking coal business (EVR) – the remaining stake is owned by Nippon Steel (20%) and POSCO (3%). The assets complement Glencore’s existing thermal and steelmaking coal production located in Australia, Colombia, and South Africa. The company believes global population growth, increased urbanisation, and a growing middle class should continue to drive long-term demand for steel and the steelmaking coal required to produce it.

Following consultation with its shareholders, Glencore is retaining its coal and carbon steel materials business. The company believes the cash generative capacity of the business significantly enhances the quality of the overall portfolio, by commodity and geography, and broadens the company’s ability to fund its strong portfolio of copper growth options as well as accelerate shareholder returns. Management sees potential upside through synergies as the EVR assets are integrated into the portfolio. The company will continue to oversee the responsible decline of its thermal coal operations.

Following a merger with its Viterra business, Glencore owns 16.4% of Bunge, the diversified global agribusiness solutions company. The company is well placed to meet increased global demand as well as the ongoing challenge of providing sustainable, traceable food and feed products to customers around the world. Glencore believes there is significant synergy and re-rating potential driven by industry tailwinds like higher US biofuel blending mandates and new capital projects. The stake is worth $3.2bn at the current share price and Glencore is subject to a 12-month lock-up period. Glencore has launched a share buyback programme, underpinned by the value of this shareholding, of up to $1bn to be completed by the time of its full-year results in February 2026.

Now to today’s update. In the first nine months of 2025, production has been solid and full-year guidance for the key commodities has been maintained, with ranges tightened to reflect just one quarter remaining.

-          Copper: own-sourced production fell by 17% to 583,500 tonnes, primarily due to lower head grades and recoveries associated with planned mining sequencing and the resultant ore fed to the plants. Full-year guidance is 850-875kt (vs. 850-890kt previously).

-          Zinc: own-sourced production is up 10% to 709,400 tonnes, mainly reflecting higher zinc grades at Antamina and higher McArthur River production. Full-year guidance is 950-975kt (vs. 940-980kt previously).

-          Steelmaking Coal: production of 24.7mt mainly comprises the acquired Elk Valley Resources (EVR) business, which produced 19.4mt. Australian steelmaking coal production of 5.3mt was broadly in line with 2024. Full-year guidance is 30-35mt (unchanged).

-          Energy Coal: production of 73.5mt was broadly in line with last year, reflecting stronger Australian production offsetting the more recent voluntary production cuts at Cerrejón. Full-year guidance is 92-97mt (vs. 90-96mt previously).

Average prices for the group’s key commodities were mixed compared to last year: copper (+5%), Zinc (+3%), steelmaking coal (-21%), and energy coal (-13%).

Glencore’s Marketing business exploits arbitrage opportunities that continuously emerge as a result of different prices for the same commodities in different locations or time periods. It provides a good hedge against commodity price volatility and finances the $1bn base dividend (see below), although clearly there is always a risk of potential losses because of that volatility. Earlier in the year, the company raised its through-the-cycle long-term adjusted EBIT guidance range for the unit to $2.3bn-$3.5bn p.a., a 16% increase from the previous range. Given the performance year to date, the company currently expects full-year adjusted EBIT around the mid-point of its target range.

There is no update on the group’s profitability or financial position. As a reminder, at the half-year stage net borrowing stood at $14.5bn, including $1.0bn of marketing lease liabilities, leaving gearing at a comfortable 1.1x net debt to EBITDA, or 1.0x including the $900m of cash received in July as part of the Viterra transaction, all of which provides significant financial headroom.

Following the decision to retain the coal and carbon steel materials business, the group’s net debt ceiling which shapes its shareholder returns framework was reset at $10bn. When net debt falls below this level (after the base distribution), cash will be periodically returned to shareholders via special cash distributions and/or share buybacks.

The dividend policy is to pay a fixed $1bn base distribution from the Marketing business, reflecting the resilience, predictability, and stability of the unit’s cash flows, plus a minimum payout of 25% of the Industrial free cash flow.

At the time of the full-year results last February, the company announced $2.2bn ($0.182 per share) of shareholder returns for 2025, made up of a $0.10 per share ($1.2bn) base cash distribution, together with a ‘top-up’ buyback programme of $1.0bn ($0.082 per share) which was completed in June. As highlighted above, the company has now commenced a new $1bn buyback programme covered by the Bunge stake. This will take total announced 2025 shareholder returns to $3.2bn (7% of the current market cap).

The company, which had considered shifting its primary listing from London, has said it will retain the listing in the UK, citing that a move to the US would not add value for shareholders.

Overall, while there is increased uncertainty around the impact of geopolitics in the shorter-term, Glencore remains of the view that in certain commodities, the scale and pace of global mine project development will struggle to meet demand for the materials needed in the future. Glencore believes it is well placed to participate in bridging this gap, through the flexibility embedded in both its Marketing and Industrial businesses to respond to global needs.

We believe commodities and resource stocks are inexpensive when compared to financial assets and are relatively under-owned in investor portfolios. Furthermore, the mining sector, and in particular Glencore, has a long history of M&A and we expect further industry consolidation in the future. Most recently, we note the merger agreement between Anglo American and Teck Resources, both of which Glencore has previously weighed a bid for. A deal with Rio Tinto has also been rumoured in the past, an outcome that may now be more likely, particularly given Rio has a new CEO.

Source: Bloomberg