Market snapshot: climbing the wall of worry

Global markets continued to climb the wall of worry, reversing some sharp declines from earlier in the week as investors returned to the fray.

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In the US, the Dow Jones and S&P 500 notched new record highs, with buying interest in the technology sector offsetting lingering concerns around the Middle East and more domestically the effects of Hurricane Milton. The likes of Amazon.com Inc (NASDAQ:AMZN), Super Micro Computer Inc (NASDAQ:SMCI) and Apple Inc (NASDAQ:AAPL) rallied, although Alphabet Inc Class A (NASDAQ:GOOGL) finished down by 1.5% on the news that the Department of Justice is weighing up what would be a landmark ruling to force a breakup of the Google business given its market dominance.

The minutes from the latest Federal Reserve meeting barely caused a ripple, mainly due to economic developments and comments since. Even so, the outsize 0.5% cut was agreed by the majority of the members, without necessarily committing the Fed to further reductions. Indeed, the current indications for a no-change decision in November have risen to around 20%, although at 80% the likelihood of a 0.25% cut remains in the driving seat. Hopes are high that today’s Consumer Price Index will further cement the feeling that the battle against inflation is largely won, with a gain of just 0.1% expected for September, annualised to 2.3%, with core inflation excluding energy and food remaining unchanged at 3.2%.

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The end of the week will herald the onset of the quarterly reporting season, where expectations are that corporates will have seen the benefit of what is proving to be a robust and growing economy despite the handcuffs of higher interest rates over the last few years. More broadly, the impending US election will come more squarely into view over the coming weeks, which could provide scope for some disappointment and uncertainty depending on the outcome. In the meantime, the main indices continue to march higher, with gains of 21.9% for the Nasdaq, 21.4% for the S&P 500 and 12.8% for the Dow Jones in the year to date.

It has been a volatile week in Asian markets and overnight the swings continued. Investor despair at the lack of detail on the stimulus package from the Chinese authorities faded somewhat as optimism returned that the upcoming news conference on Saturday could contain more specific details on fiscal stimulus in particular. Indices both in Shanghai and the Chinese blue chip CSI300 rose by around 3%, with the latter recouping some of the previous day’s 7% loss. The Hang Seng index in Hong Kong also rallied by around 4%, bringing its return to more than 25% this year.

Even so, an element of caution is not far from the surface. The significant declines earlier in the week given the absence of concrete planned actions could yet be replicated this weekend, with the general feeling that the economy is in need of real repair at the forefront of investors’ concerns. China has this year for the most part dropped to second place as a destination in the region, where Japan has attracted interest after some considerable time of its own in the investment doldrums.

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The positive momentum from overseas spilled over to the UK at the open, although the gains were measured. The FTSE 100 was hampered by the usual Thursday headwind of stocks being marked ex-dividend which, all things being equal, reduces prices by the amount of those dividends and which today included Kingfisher (LSE:KGF), Tesco (LSE:TSCO), Taylor Wimpey (LSE:TW.) and WPP (LSE:WPP). Elsewhere, stock movements were limited although Segro (LSE:SGRO) shares rose by almost 2% after seeing its bid for Tritax EuroBox Euro Ord (LSE:BOXE) being trumped – at least for the moment – by Canadian company Brookfield.

The main riser, however, was GSK (LSE:GSK), whose shares surged by more than 6% in opening exchanges. The group announced that it had settled 80,000 Zantac heartburn cases in the US for $2.2 billion without accepting liability, thus removing a layer of uncertainty which has overhung the stock of late and limited share price gains. Overall, the FTSE 100 is now ahead by 6.9% so far this year, which is on course to provide a decent total return for investors given the additional average dividend yield of 3.6%. The latest gain also takes the premier index to within 2.1% of its previous closing high, although returning to the level seen in May has so far proved elusive.