Market snapshot: all eyes are on this data

At the end of a tense week for global stock markets, investors prepare for one of the biggest events of the month. Our head of markets sets the scene.

Markets returned to a sense of relative calm after a torrid week, initially prompted by the removal of the US AAA credit rating by Fitch.

Investors who had been looking for an excuse to take some profits after a strong recent rally were handed the opportunity by the downgrade, while subsequent economic data raised further questions about the Federal Reserve’s next move.

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US hiring remains strong and jobless claims low as signs are sought for any weakening in the labour market. Perhaps the most closely watched of all economic releases, the non-farms payroll figure, is due later today, with the consensus being that 200,000 jobs will have been added in July, as compared to 209,000 in June. In addition, it is anticipated that the unemployment rate will remain at 3.6%, with the annual hourly earnings rate expected to rise by 0.3% from the previous month, itself an inflationary number which will be scrutinised.

Meanwhile, the corporate earnings season continues apace, with an estimated 80% of companies having beaten expectations so far. Amazon.com Inc (NASDAQ:AMZN) shares rose strongly after the bell after smashing expectations and offering a positive outlook, while Apple Inc (NASDAQ:AAPL) eased slightly following marginally lower earnings than the previous quarter.

With the resilience of the US economy being tested and with the Fed unwilling or unable to confirm that it has completed its hiking cycle, sentiment remains cautious, although even this week’s jitters have done little to upset the investing applecart. In the year to date, the Dow Jones remains ahead by 6.2%, the S&P500 by 17.2% and the Nasdaq by 33.3%.

Asian markets were mixed, although there was some relief for investors in China as the central bank eased some debt controls in the beleaguered property sector. In addition, the bank revealed that it would provide the wherewithal to maintain liquidity in the banking system, while an economic release showed that the country’s services activity had risen more quickly in July. However, investors remain keen on further and more concrete proposals from the Chinese authorities in reigniting an economic recovery which has stalled of late.

There may have been some slight relief that the Bank of England chose to hike rates by 0.25% to 5.25% rather than the 0.5% some had feared, but the task remains unfinished, with a terminal rate of 5.75% still being priced in by markets.

The UK economy has shown surprising signs of resilience this year, but growth has been tepid and could well be bowled over by more interest rate rises which are likely to dampen any signs of further recovery. The uncertainty overhanging the economy’s prospects has been most keenly felt in the FTSE250, which has given up any previous gains and is currently trading flat for the year.

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The premier index, meanwhile, only briefly showed some signs of life after several weak sessions. A stabilisation of the oil price and some downward pressure on sterling have failed to have the usual and desired impact on the index, which has drifted by more than 2% over the week.

In opening exchanges Friday, gains were cautious with few highlights, although there was some renewed interest in the betting sector, with Entain (LSE:ENT) and Flutter Entertainment (LSE:FLTR) both rising ahead of their half-yearly results next week.

The FTSE100 is now ahead by just 0.9% in the year to date, with a current absence of international investor interest compounding the lukewarm performance.