Market snapshot: more records tumble as stocks march higher

With little to upset the applecart, US markets powered to new record highs as peak optimism continued to drive buying interest.

Investors have been reassured over recent days following Federal Reserve Chair Jerome Powell’s comments to lawmakers, which have contained no negative surprises. Most pertinently, the Fed stands prepared to reduce interest rates this year when circumstances dictate, and implied that such a move is not far away, even though there is no immediate rush to ease monetary policy in light of consistently favourable economic data.

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Indeed, the relatively benign backdrop will be put to the test again today with the release of the non-farm payrolls report. Investors will be hoping to see employment beginning to slow while remaining solid, and will also be keeping an eye on wage growth which itself is inflationary. The data is expected to show that 200,000 jobs were added in February, following the previous month’s blowout number of 353,000, while unemployment is likely to remain unchanged at 3.7%. 

In the meantime, technology stocks continued to forge ahead in anticipation of the easier monetary conditions to follow and after what was a generally pleasing reporting season. The Semiconductor index was a particular beneficiary of investor interest, as buyers sought to ride the current euphoric wave surrounding the potential for all things AI, with NVIDIA Corp (NASDAQ:NVDA) enjoying further gains. In the year to date, the Nasdaq has now added 8.4%, closely followed by a gain of 8.1% for the S&P500, while the Dow Jones is also in positive territory to the tune of 2.9%.

Asian stocks largely joined the investment party, with most central banks increasingly agreed on the downward trajectory for interest rates, and with Japan’s Nikkei index continuing to attract overseas buying interest. This was despite the fact that the Bank of Japan could be heading in the opposite direction in exiting negative interest rates, which sent the yen higher after a recent spell of weakness, with wage growth rising to a level which could prompt the central bank to begin tightening policy.

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China markets were mildly positive, although the disappointment of this week’s National People Congress is still dampening sentiment. The lack of any announcements regarding an aggressive stimulative stance in reviving the economy at a time of high unemployment, low consumer confidence and an embattled property sector remains a source of despair for investors. The authorities appear keen to let the economy recover at its own pace and will have taken some solace from the latest import and export growth numbers, which came in ahead of expectations.

Despite largely being seen as something of an anodyne Budget, some of the announcements have been enough to lift UK markets over recent days, particularly the mid-cap sector where it is hoped that some investor interest can be courted following the announcement of the UK ISA.

Despite the fact that the impact could be marginal, there has also been a revitalisation over recent days of Merger & Acquisition activity, with overseas buyers apparently reacting to the large valuation discounts currently available across the UK investment landscape. The FTSE250 has improved its recent performance as a result, although remaining down by 0.6% so far this year.

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Such activity also spilled over to the premier index, where the announcement of an all-share merger between Mondi and DS Smith was confirmed in principle. Nonetheless there was little other corporate activity of note as the FTSE100 continues not only to fail to attract new investment interest but also to trail the record-breaking highs being seen selectively elsewhere across the globe.

The index is currently down by 0.7% in the year to date, with an average dividend yield of 3.8% across the index at least providing some solace to exasperated shareholders.