Interactive Investor

Market snapshot: flourishing FTSE 100 tracks Wall Street higher

Share prices remain volatile but are at least travelling in the right direction. ii's head of markets studies movements in the US and what's driving sentiment over here.

3rd May 2024 08:19

by Richard Hunter from interactive investor

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    US markets regained some of their footing as attention turned back to what has been a mostly successful quarterly earnings season so far.

    Mega-cap technology shares were back in the limelight, rising as bond yields dipped, with the Nasdaq advancing by 1.5% amid jumps of more than 3% for the likes of NVIDIA Corp (NASDAQ:NVDA) and Inc (NASDAQ:AMZN).

    Qualcomm Inc (NASDAQ:QCOM) earnings beat expectations, sending the shares higher by almost 10%, while Apple Inc (NASDAQ:AAPL) rose by more than 6% after the bell having reported sales which had declined by less than had been feared. In addition, the company announced an increase to its dividend, as well as a share buyback programme of $110 billion.

    Deep into the earnings season, an estimated 75% of companies have so far beaten expectations, which has limited some of the losses for the main indices as corporates take the lead for justifying higher valuation levels. Investors have been rattled by economic data which continues to show strong growth and persistent inflation, neither of which are likely to compel the Federal Reserve to cut rates any time soon.

    Expectations are constantly being revised for the number and timing of rate cuts this year, with the Fed increasingly being vindicated for its previous “higher for longer” mantra and also the fact that its decisions will remain data dependent.

    The next test of investors’ mettle comes later today with the release of the eagerly anticipated non-farm payrolls (NFP) report, where the consensus is that 243,000 jobs will have been added in April, as compared to 303,000 the previous month, and for the unemployment rate to remain unchanged at 3.8%.

    More recent NFP prints have tended to provide surprises which have resulted in sharp market moves and any large deviation from the consensus in either direction would add to volatility. A particularly high reading, for example, would play against the narrative that higher interest rates are cooling demand, potentially pushing the need for any rate cuts at all further out.

    In the meantime, the main indices each remain ahead so far this year although some way lower than the levels seen during the unbridled optimism of the early months. In the year to date, the Dow Jones is now up by 1.4%, the S&P500 by 6.2% and the Nasdaq by 5.5%.

    Asian markets also rose on tech stock buying, although overall volumes were lighter with public holidays in both Japan and mainland China. The week has been dominated by speculation around the Japanese yen, where the likelihood of intervention by the Japanese authorities to shore up the currency seems to have been proven.

    Elsewhere, the level of interest in tech shares increased following the ongoing possibility that the Chinese authorities have further moves planned in an effort to revitalise an ailing economy and overseas investment interest in the country.

    US markets may have lost some of their mojo but the same cannot be said for a flourishing FTSE100, where opening strength lifted gains in the year so far to 6%. The mixture of technical factors, such as rising commodity prices and higher interest rates underpinning the likes of the mining, oil and banking sectors has been combined with improving sentiment towards the premier index.

    Even at these elevated levels at or around record highs, the valuation of the index remains undemanding in comparison to many of its peers which could suggest that the recent rally still has some way to go.

    More broadly, the improving sentiment and some chinks of light at the end of the UK economic tunnel have reversed earlier losses for the more domestically focused FTSE250, which is now ahead by 1.8% in the year to date. The growing acceptance of the UK as something of a value trap has also prompted increased Merger and Acquisition activity, with a number of companies attracting the attention of overseas suitors.

    These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

    Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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