Market Report: Markets breathe in ahead of key economic data as tech bulls fight back
Derren Nathan, head of equity research, Hargreaves Lansdown: “After a quiet start to the week the FTSE 100 has edged down a few points as the UK braces for one of the most hotly anticipated Downing Street Budgets in recent history. If rumours of an imminent cut to the medium-term growth outlook by the Office for Budget Responsibility prove to be true, that makes the delicate balancing act of fiscal prudence and stimulating the economy more precarious than ever.
DIY conglomerate Kingfisher, the name behind B&Q and Screwfix gave an encouraging update, raised its full-year guidance despite softening market conditions in the UK where it remains mindful of inflation and tomorrow’s Budget. Strategic initiatives and a focus on efficiency saw the group raise its underlying pre-tax profit guidance from around £540m to a range of £540-£570m. Kingfisher is gaining share in a challenging market and despite the recent recovery in the share price still offers a dividend yield of over 4% as well as the potential for some modest capital appreciation.
Friday’s bounce on Wall Street continued higher on Monday, with US futures suggesting these gains will hold at today’s open. Tech stocks led the way with the NASDAQ Composite surging 2.7%, its strongest day since mid-May bringing the index back to within 5% of the all-time highs seen a month ago. Google parent Alphabet was one of the notable risers of the day, buoyed by further praise for the Gemini 3 AI model and a cloud deal with NATO, which is a ringing endorsement from an organisation where information security is mission-critical. Investors in custom chip designer Broadcom, one of Alphabet’s key partners, also enjoyed an uplift with the shares climbing over 10%.
Today’s attention will turn to key US economic data releases before traders start to wind down ahead of Thursday’s Thanksgiving pause. Markets will be looking for further reassurance that the soft-landing narrative isn’t gravitating in the direction of stagflation. But the public numbers coming out today are more backward looking than usual, delayed by the earlier US government shutdown.
On the inflation side, September’s Producer Price Index is expected to have notched up a 0.3% increase after falling back 0.1% in August. Retail sales growth in September is expected to have slowed from 0.6% to 0.4% but the Conference Board’s Consumer Confidence Index (a drop of 1.1 points to 94.6 expected) will be a more relevant number as retailers start the countdown to Christmas. The other key piece of the puzzle is this week’s rolling four-week employment report by ADP which at the last count showed job losses of 11,250 per week on average. There’s a lot to process here but, in essence, it will need either a hotter-than-expected PPI number, or punchier read out on the demand and jobs front, to derail hopes of a further rate cut by the Fed in December, with futures now implying over an 80% chance of a quarter point drop next month.
Brent Crude oil prices slid back down below $63 per barrel this morning, erasing some of yesterday’s gains as tentative hopes for a Russia-Ukraine peace deal emerge, raising the prospect of a lift on Russian sanctions in an already oversupplied market, a theme that’s overshadowing rising expectations of a US rate cut.”