Market snapshot: economic data and broker upgrades drive sentiment

Investors have a bundle of key data to digest this week, while optimistic analysts have done some UK blue-chips a favour. Our head of markets rounds up the action.

The remainder of the week will provide investors with plenty to ponder, as a raft of economic data gives the latest indication on the state of the US economy.

At the same time, a speech by Federal Reserve Chair Jerome Powell later today is expected to reiterate the central bank’s determination to focus on inflation as its core objective, regardless of the potential ramifications. Although such comments should be of little surprise, inevitably those searching for confirmation that the Fed will slow its round of rate hikes are likely to be disappointed once more.

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In terms of the US  economy itself, a number of releases will provide insight into its current performance as the week unfolds, ranging from third quarter GDP numbers, JOLTS job opening, personal consumption expenditure and culminating with the non-farm payrolls report on Friday. The current expectation is for 200,000 jobs to have been added in November, as compared to 261,000 the previous month, with investors keen to see some weakening in what has been a strong labour market as evidence that the Fed hiking policy is beginning to take effect.

Markets were lacklustre ahead of the imminent releases, with a survey suggesting some weakening of consumer confidence insufficient to drive gains. As such, the main indices remain firmly in the red for the year to date, with the benchmark S&P500 having lost 17%, the Dow Jones 7% and the Nasdaq 30%.

Asian markets were broadly positive overnight, after previous protests in mainland China over the zero-tolerance Covid policy had rocked local markets. Comments from officials that the majority of people over 80 had received booster shots was accompanied by news of a decline in cases on the mainland, which helped sentiment despite an official survey which pointed to a further contraction in factory activity in November.

The oil price also caught a bid on hopes for a loosening of Chinese restrictions which could lead to renewed demand. However, although the price remains up by 8% in the year to date, the current level of around $84 is a far cry from the $120 level achieved in June, as general China demand concerns have joined fears of a potential global recession as central banks continue to turn the monetary tightening screw.

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In terms of global performance, the FTSE100 continues to punch above its weight, as investors seek the cover of an established index driven largely by mature companies with an element of defensiveness.

The strength of the US dollar has improved earnings numbers on repatriation, there is  an average dividend yield of 3.7% and some overseas buying interest has left the premier index ahead by 2.3% in the year to date. In early exchanges, broker upgrades lifted the likes of Melrose Industries (LSE:MRO), Rolls-Royce Holdings (LSE:RR.) and BAE Systems (LSE:BA.).

The same cannot be said of the FTSE250, however, where a decline of 18% so far this year is a reflection of the parlous state of the UK economy at present. This index has failed to capture the attention of investors, given its domestic focus, with any immediate positive catalysts few and far between.