Market snapshot: holding pattern ahead of another pivotal day

The holding pattern remained in markets generally ahead of another pivotal day, with some cautious optimism returning as most indices ground higher.

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Treasury yields fell once more, although this was tied largely to a fall in the oil price after reports emerged that supplies through the Strait of Hormuz could be rising as Iran and Oman attempted to broker a deal. Even so, reports that the Treasury could be lining up its financial firepower from the $1 trillion (£730 billion) General Account to put a lid on yields was another downward pressure. At the same time, the speculation has led to the return of the “debasement trade”, where investors move capital to hard assets such as gold at the expense of the US dollar.

The next leg of the journey will follow today with the release of the Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation. Headline inflation is expected to have risen by 3.6% in July, while core inflation, which excludes more volatile energy and food prices, is expected to rise to 3.2%, both of which would represent incremental gains.

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A preliminary estimate of second-quarter GDP is also on the agenda, with business investment expected to nudge the figure to a slightly higher 1.6%, adding to the data which the Fed will be considering on the broader strength of the economy.

Then there is the AI darling NVIDIA Corp (NASDAQ:NVDA), which posts its latest update after markets close tonight. Shares gained by 2% ahead of the quarterly numbers, but there is no doubt that the bar of expectation is at fresh highs, as indeed is the company’s revenue.

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Second-quarter results are estimated to be stellar once more, with 97% growth in revenue to $92 billion, but the outlook on maintaining this extraordinary growth will also be firmly in investors’ sights. Equally possible is a volatile reaction to the results, where on average over the last three years a move of around 7% - in either direction – is the norm, and where the company’s dominance will have a large impact on determining ongoing confidence in the AI trade.

Elsewhere, the latest consumer confidence reading was a disappointment, with the index coming in down by 0.8 points and shy of expectations. In the background, the ongoing conflict in the Middle East and the current trade spat with Canada are leading to a more downbeat outlook. But interestingly any such forward indicator has yet to be proved by consumer spending numbers which have remained resilient, leading to questions of a gulf between what the consumer thinks and actually does.

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A generally positive trading day was further proof of some underlying strength in the main indices where, in the year to date, the Dow Jones has added 11.5%, the S&P500 12.2% and the Nasdaq 12.5%, the latter bolstered by the mini-recovery in semiconductor stocks yesterday.

The main weight on the FTSE100 at the open was a decline in BP (LSE:BP.) and Shell (LSE:SHEL), which tracked the oil price lower, and the concomitant rise in International Consolidated Airlines Group SA (LSE:IAG) was insufficient to offset a flat overall performance.

With the copper price ticking higher, there was also some strength emanating from the likes of Antofagasta (LSE:ANTO) and Anglo American (LSE:AAL), while Sage Group (The) (LSE:SGE) succumbed to some selling pressure after a strong recent run.

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The FTSE100 nonetheless remains ahead by 9.5% so far this year and tantalisingly close to the record closing high which it set in February. That target remains just 0.3% away, with the index having surpassed the level intraday of late but without being able to carry such strength to the close.

Nonetheless, even in the absence of any immediate obvious catalysts, the move higher has been the twin result of a resurgence of global investor interest, and an acknowledgement of the developed and stable nature of its constituents which had worked against the index for so long as the technology boom fired up elsewhere.