Market snapshot: FTSE 100 stands firm

Moving into the final full trading week of the year, there seems to be a growing sense that the heavy lifting has now been done.

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US markets succumbed to a bout of mild profit taking on Friday, removing the gloss from several indices which had hit record closing highs in the previous full sessions.

One index which had not participated was the Nasdaq, where doubts over the AI trade continued to dominate. The latest casualty was Broadcom Inc (NASDAQ:AVGO), whose shares fell by more than 11% despite beating fourth-quarter earnings estimates, with an equally upbeat outlook for the current quarter. However, the sector has been dogged by worries of over-investment, margin compression and valuation worries.

The rotation away from mega cap tech stocks to the likes of healthcare and financials also pushed the smaller cap Russell 2000 to an intraday all-time high, but the general market insouciance left the index to close down by 1.5% on the day, although ahead by 1.2% on the week.

This week will herald the long overdue release of the non-farm payrolls report as well as another inflation reading, although the likelihood is quite simply that the data will be too stale to be meaningful.

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In the meantime, the main indices continue to fly high despite the many headwinds which the last few months have brought. In the year to date, the Dow Jones has risen by 14%, with gains of 16% and 20% for the S&P500 and Nasdaq respectively reflecting what has been a strong direction of travel.

Shares in Asia struggled with their own domestic issues overnight in the absence of a strong lead from Wall Street. China reported new economic data which signalled a tepid economy which has failed to benefit from the temporary tariff truce with the US.

Investment in fixed assets such as factory equipment fell in November, retail sales rose but were well shy of estimates, while new home prices declined, indicating that a recovery in demand remains off the table for now. The data also follows a meeting of the country’s leadership which yielded no policy shifts, despite its pledge to reinvigorate consumer spending and investment.

Meanwhile, the Nikkei 225 also ran into a wall of sellers, with a largely expected interest rate rise to come at the end of the week. The latest manufacturing survey revealed a marginal improvement in business sentiment, although the outlook was rather less positive. In the latest quarter, there was further proof of an economy under pressure with a contraction of 2.3% annualised.

Unfortunately, only some of this pessimism has been mitigated following the US agreement to limit baseline duties to 15%, which in turn has removed some of the clouds overhanging the likes of the car and electronics sectors.

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Against the global backdrop the FTSE100 stood firm, enjoying the benefit of its large exposure to the resource sector which has been such a boon this year, particularly in the absence of the more fashionable technology stocks.

The latest gold price strength echoed a familiar theme, lifting two of the standout performers. In the year to date, Fresnillo (LSE:FRES) and Endeavour Mining (LSE:EDV) have now risen by an astonishing 357% and 146% respectively, in what might otherwise have been a lacklustre period given the lack of demand from the likes of China in the resources space.

For the index as a whole, a strong start lifts the year-to-date performance to a positive 18.6%, albeit some 2.2% away from the previous record closing high which was set last month. Even so, with an average dividend yield of 3.1% lifting the total return to almost 22% so far this year, its time in the international investment wilderness is perhaps coming to a close.