Market Report – US markets keep up the momentum, wet weather hurts UK retail sales
Matt Britzman, senior equity analyst, Hargreaves Lansdown said: “The FTSE 100 closed broadly flat yesterday and has opened today in a similar fashion, without too many catalysts to drive a move either way. Housing sector investors welcomed Rachel Reeve’s speech yesterday and new supply pledges helped a slew of listed builders tick higher. Vistry’s first-half numbers were out this morning and didn’t have too many surprises. Full-year guidance stays where it is, and demand for affordable housing at scale continues to act as a tailwind.
UK retail sales disappointed last month, down 0.2% year-on-year. Barclays’ data on card spending showed a similar trend, with consumer purchases down 0.6%. In typical British fashion, summer has yet to make an extended appearance. Weather-sensitive categories like clothing and footwear were hit particularly hard during the damp start to June, and post-election glee hasn’t had time to feed into the data yet. The weather may be gloomy, but the data showed rays of sunshine. Entertainment remains a core area of spending for consumers regardless of the weather, with growth in pub visits, takeaways, and digital streaming services.
The S&P 500, Nasdaq and Nikkei closed at record highs in yesterday’s trading, with the semi-sector driving gains across all three indices. As the US earnings season approaches, investor expectations are on the rise. The mega-cap stocks, which have excelled over the first half, are anticipated to lead the charge. But before attention turns to earnings, markets have Chair Jerome Powell testifying in front of Congress tomorrow and Wednesday, and then US inflation data to digest on Thursday and Friday. Bullish investors will be hoping for further signs of easing conditions. If and when the Fed finally starts the long-anticipated rate-cutting cycle, there could be opportunities for small-cap and cyclical stocks to shine. A broadening of market performance would be a positive development, underpinning a more sustained and durable bull market.
Brent Crude futures hover around the $85.8 mark. Prices have eased in recent sessions as concerns about supply disruptions have eased. Hurricane Beryl has been downgraded and now looks set to cause little to no impact on US oil markets. There’s also been positive news from Canada, where wildfires didn’t spread toward Suncor Energy’s infrastructure as some had feared. More than ever, it’s a reminder that the world is changing, and more extreme weather events are becoming an increasingly important factor for traders to price in.”
Derren Nathan, head of equity research, Hargreaves Lansdown said: “BP’s second-quarter update revealed that upstream production is now likely to be broadly flat compared to the first quarter, an improvement over the slight fall expected in previous guidance. But BP’s integrated model means there are a lot of moving parts, and they haven’t all been pointing in the same direction. Higher margins at the pump have been tempered by weaker selling prices for some refined products in the customer segment. There shouldn’t be too much change, if any, to analyst expectations off the back of this statement. BP’s focus has been a little scattergun of late, but it’s likely to remain an important part of the energy mix for some time to come. It still has one eye on the energy transition, and there appears to be little downward pressure on the oil price in the immediate future. This should keep both cash flow and generous distributions to investors flowing. At sub 8x earnings and with a yield of 5%, the shares are worth a look.”
