Market snapshot: investors expect a slack Friday

In the absence of a lead from Wall Street, closed for Thanksgiving and with a shortened day to follow today, Asian markets were mixed as investors turned their attention to local issues.

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For the US, the pause is time for reflection on what has been a heady month. The introspection will culminate next week with the release of the non-farm payrolls report which, alongside any early indications of the success of the Black Friday weekend, will guide sentiment.

The early indications are that 180,000 jobs will have been added in November, compared to a somewhat left-field number of just 12,000 last month, skewed due to the effects of both the October hurricanes as well as the Boeing strike, leading some to suggest that the underlying figure would otherwise have been nearer to 130,000. In addition, the Labour Statistics bureau reported that the survey collection rate was well below average, which implies that there could be some major revisions to the number next week.

In Japan, the Nikkei index dipped after the release of an inflation report which revealed a rise from 1.8% to 2.6% in November, due largely to an increase in fresh food prices. Core inflation, which excludes that input, also rose from 1.8% to 2.2% suggesting that the Bank of Japan will need to continue on its monetary tightening path. As a result, the yen strengthened, which in turn crimped the prices of exporters on which the country is so reliant.

Chinese markets made some progress ahead of an economic planning meeting which is usually held in December, reigniting hopes of some measures of repair. However, it is hardly a secret that the tendency of the Chinese authorities to take a multi-decade view of the economy is at odds with the more immediate timeframe of investors, who have been voting with their feet following numerous disappointments on the scale of any stimulus measures announced so far this year. The core concerns of a beleaguered property sector, high youth unemployment and tepid consumer sentiment still remain areas in need of attention.

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The US may be expecting a record Black Friday weekend with sales of anything up to $300 billion, but in the UK the situation is more nuanced. As evidenced by the numbers from easyJet earlier in the week, the family holiday remains sacrosanct despite the wider economic pressures facing the UK consumer. The other seemingly secure bout of spending is during the festive season, which could overlap or bring forward spending over Black Friday and Cyber Monday. 

However, the numbers could be rather lighter even if they do provide the economy with a brief boost, after a disappointing consumer confidence report yesterday, which showed that sentiment was still weak even after (and perhaps because of) the measures announced in the recent Budget.

The rebuffed Aviva (LSE:AV.) approach for Direct Line Insurance Group (LSE:DLG) was another reminder that in many corners of the markets, companies are noticeably cheap in terms of historic valuation, let alone in comparison to some of their global peers. It remains to be seen whether such value-seeking M&A activity becomes a feature next year, or whether international investors will continue to chase tech-led growth in the US, a strategy which has certainly paid handsomely this year.

Nor has the premier index been exempt, with packaging company DS Smith (LSE:SMDS) topping the leaderboard in the year to date after a share price rise of 89%. Ahead of half-year numbers next week and with the announcement of an increased Bank of America stake overnight up to 5.5%, the group’s combination with International Paper Co (NYSE:IP) of the US remains on track.

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Elsewhere, broker notes dominated the features in early trade, with upgrades to both IMI (LSE:IMI) and Anglo American (LSE:AAL) being slightly offset by a downgrade to BAE Systems (LSE:BA.), allowing some profit taking after a run which has seen the shares rise by 22% over the last year. Trading was generally light and somewhat directionless in opening exchanges, little changing the performance of the FTSE100, which has laboured to a gain of 7.2% in the year to date.