It's been an eventful start to what could be a pivotal week for markets on both sides of the pond.
Earnings strength is continuing to keep the inflationary and tapering bears at bay, shaking off the historic trend of October being a troublesome month for markets.
The S&P500 and Nasdaq have again moved to record highs, with the vast majority of companies who have reported earnings so far having beaten expectations. Further strength has come from the likes of Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), while Microsoft (NASDAQ:MSFT) has become the most valuable US company by market cap for the moment, having nudged past Apple (NASDAQ:AAPL).
Despite some disappointing numbers from Starbucks (NASDAQ:SBUX) following issues in China, this miss has proved to be the exception rather than the rule so far.
This promises to be an important few days in the US, with the much anticipated announcement of the Federal Reserve’s tapering calendar expected to be announced. The wisdom of this decision will be put to an initial test on Friday with the announcement of the non-farm payrolls number, where the current consensus of 425,000 jobs having been added compares with the disappointing print last month of 194,000.
There was further relief from an economic release showing a solid increase in consumer spending in September, despite the fact that labour market shortages, inflationary pressures and supply chain blockages remain worrying trends bubbling under the surface.
Even so, in the year to date the major indices have added to previous strength, with the Dow Jones now ahead by 17%, the S&P500 by 22.6% and the Nasdaq by 20.3%.
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There are similar themes at play in the UK, with the Bank of England announcement later in the week expected to show a small hike in interest rates. However, the decision could be finely balanced given the current strength of inflation, and concerns remain that moving too early on hiking interest rates, at this potential turning point in the UK economy, could be a blunt and unnecessary tool at the present time.
The main indices have made a cautiously positive start to the week, having taken some of Wall Street’s positive momentum on board. In early company news, Barclays (LSE:BARC) shares are under some pressure following the unexpected resignation of chief executive Jes Staley following a probe into his relationship with disgraced financer Jeffery Epstein.
Staley will be contesting the findings of the probe and, in the meantime, his replacement has already been announced, suggesting that contingency measures had already been put in place. Even so, the inevitable disruption will be an unwelcome side show to Barclays’ recently strengthening recovery.
Ahead of what could be a pivotal week for markets on both sides of the pond, the major UK indices have also continued their progress, with the FTSE100 up by 12.5% and the FTSE250 up by 13% in the year to date.
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