Market snapshot: China, results, rates and ratings

Activity in China is still very much on the radar, but attention shifts to the US ahead of inflation data and release of central bank minutes. ii's head of markets also runs through events on the London exchange.

9th October 2024 08:22

by Richard Hunter from interactive investor

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US markets shrugged off the disappointment reverberating around the Asia region, as investors turned their focus to the domestic economy in light of some key upcoming data.

Treasury yields eased, inviting a fresh round of buying in high-growth shares which propelled the technology sector higher.

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Gains were broad based, with rises of around 4% for NVIDIA Corp (NASDAQ:NVDA) and more than 1% for the likes of Microsoft Corp (NASDAQ:MSFT) and Meta Platforms Inc Class A (NASDAQ:META). Elsewhere, there was less pressure on the energy sector as the oil price stabilised after a recent rally which has tracked escalating tensions in the Middle East.

Minutes of the latest Federal Reserve meeting today may garner less interest than usual, given the raft of subsequent comments from Fed members as the economic picture has evolved. Indeed, any comments over concerns around a deteriorating labour market will have been eclipsed by last week’s bumper non-farm payrolls report, the result of which has been the tempering of interest rate cut expectations.

Of rather more interest, perhaps, will be tomorrow’s reading on inflation in the form of the Consumer Price Index, which could show that the taming of inflation is just a whisker away from the Fed’s target. In the meantime, there is now a near 90% probability of a more subdued 0.25% cut in November in terms of consensus, with a small chance of no change at all beginning to surface.

The end of the week will herald the start of the latest quarterly reporting season in earnest, with consumer demand in the limelight when the likes of JPMorgan Chase & Co (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) kick off with the latest news on the ground from the banks.

More broadly, there are expectations that earnings overall will have risen by more than 4%, largely driven by healthcare and tech, in what would be a fifth consecutive quarter of growth. Having recovered from the weak session of the previous day, the main indices have continued their march higher, with the Dow Jones now ahead by 11.6%, the S&P500 by 20.6% and the Nasdaq by 21.1% in the year so far.

Shares in China, meanwhile, underwent another difficult session as investor disappointment in the region persisted. The main concern was that the raft of measures announced prior to last week’s holiday – which had lit the fire under a moribund market – were not followed up with any specific actions from the authorities, or indeed further plans. The puncturing of enthusiasm fed through to commodity stocks, while the main indices nursed losses of around 3% after what had been an even more bruising session the previous day.

The slumps came despite Beijing’s insistence that it was fully confident of achieving its full-year growth aspirations, with investors forced to consider the previous statues of an economy suffering from high youth unemployment, weak consumer confidence and demand, and a beleaguered property sector clearly in need of resuscitation.

The Asian disillusionment had weighed heavily on the premier index in the UK in the previous session, which fell by 1.4% on a triple whammy of a lower oil price, the China experience and a more localised alert in the housebuilding sector following a profit warning from Vistry Group (LSE:VTY).

Some of those losses were erased in opening exchanges despite a continuing overhang on the likes of Prudential (LSE:PRU), with the ongoing expansion plans of both Mondi (LSE:MNDI) and Informa (LSE:INF) receiving favourable attention. Broker upgrades also lifted United Utilities Group Class A (LSE:UU.) and Marks & Spencer Group (LSE:MKS), the latter of which has risen by 36% this year as its transformation plans gather increasing interest from investors.

The nudge higher leaves the FTSE100 ahead by 6.3% in the year to date, although a return to the May highs has proved elusive. Despite edging towards the record close on a number of occasions, the index is currently 2.7% away from that level with the next sustained catalyst for a further rally yet to emerge.

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