Market snapshot: FTSE 100 hits two-month low as confidence wobbles

Stocks have hit record highs in the US and have recovered strongly here too, but many UK shares are now as cheap as they've been since May after a poor few days.

Investors have moved risk averse for the moment, as a number of persistent concerns weigh on sentiment.

In the US, for example, the stubborn presence of the Delta variant of Covid-19 has led to some switching from growth stocks, such as big tech into defensives like healthcare and utilities, as various levels of lockdown continue in many parts of Asia, threatening to defer the global economic recovery.

Meanwhile, consumer confidence fell in July on inflation concerns, while this week will provide the first part of an acid test on the domestic corporate story. With expectations extremely high, and with some predicting the strongest growth rate since the tail end of the great financial crisis in 2009, there is perhaps more scope for disappointment rather than positive surprise.

The likes of Netflix (NASDAQ:NFLX), Twitter (NYSE:TWTR), Coca-Cola (NYSE:KO), Verizon (NYSE:VZ), AT&T (NYSE:T), American Express (NYSE:AXP) and Johnson & Johnson (NYSE:JNJ) will each give indications of whether the high hopes were justified, and whether the performance against an unchallenging quarter from the previous year will maintain the strong momentum seen in the first quarter.

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Despite the pause for breath, the main indices remain strongly ahead in the year to date, with the Dow Jones having added 13.3%, the S&P500 15.2% and the Nasdaq 11.9%.

There has also been some weakness in the oil price as oil cartel “OPEC+” announced that there will be a phasing out of significant production cuts by September 2022, with increases in supply due in August. However, this has not been enough to derail significant appreciation on the basis of an imminent and expected spike in demand, with the oil price remaining up by 41% so far this year.

The general breadth of economic concerns has inevitably spread to the UK market, with the likes of the oil and mining sectors under pressure within the premier index on fears of slowing growth. At the same time, stocks caught in the reopening trade such as the travel sector continue to be volatile even after the easing of some international restrictions, as time begins to run down on a potential 2021 return to widespread tourism.

The more domestically focused FTSE250 has held up reasonably well, helped along by a surprisingly resilient performance from the UK economy thus far, with the index having added 9% in the year to date. Meanwhile, the FTSE100 remains ahead by 7.3%, with the more recent stalling of progress likely to add to its attraction as an investment destination on valuation grounds, as compared to many of its global peers.

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