Market snapshot: muted moves amid inflationary concerns

Investors were somewhat rattled by the fact that while the threat of high inflation is moderating, it has not been erased.

Friday’s producer price index reading in the US muddied the picture after a relatively benign consumer release the previous day. The PPI rose by 0.3% against the previous month, against an expected 0.2%, while year on year the figure rose by 0.8%, compared to 0.2% in June. If nothing else, the figure provided a stark reminder of the Federal Reserve’s previous comments that it would remain data dependent in deciding the future path of interest rates, although for the moment the consensus remains that there will not be a hike at the September meeting.

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Elsewhere, the technology-heavy Nasdaq ended the week with a whimper rather than a bang, as some froth was taken from the recent meteoric rise of semiconductor stocks, dragging down the likes of NVIDIA Corp (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD). The dip did little to alter the onward march of the index, however, with the Nasdaq ahead by 30.4% in the year to date. The tech influence has also boosted the benchmark S&P 500, which is still ahead by 16.3% this year, while the more traditional Dow Jones index has added 6.4%.

As the latest reporting season begins to wind down, this week sees the release of updates from retailers Home Depot Inc (NYSE:HD), Target Corp (NYSE:TGT) and Walmart Inc (NYSE:WMT), with margin pressure having been a theme of the season more generally. In addition, there are also retail sales figures which are expected to reveal a rise of 0.4% in spending, while investors will also be looking closely at credit card use in particular to ascertain exactly how consumers are currently choosing to spend, with pandemic savings now seemingly evaporating.

While the company news decelerates, there is no shortage of further economic clues for investors to digest, including the latest Fed minutes, building permits and housing starts data, and a general housing market index release. While the Fed minutes will not reflect the effects of subsequent data to real time thinking, they may nonetheless provide a barometer of the general feel of its members to the current challenges.

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Asian markets had a poor start to the week, seemingly being attacked from all angles. Aside from the inflationary concerns emanating from the US, the ongoing technology security spat between the US and China weighed on sentiment, while the strength of the dollar put further pressure on the Japanese yen, although this was of some benefit to exporters. Of particular concern, however, was further evidence of weakness in the Chinese property sector, with some developers apparently struggling to meet repayments. The wall of silence on monetary stimulus from the authorities has been striking, and it remains to be seen whether this will change after further releases this week on retail sales and industrial output which are expected to mirror the country’s current issues.

The lead from other major markets left the UK with nowhere to go, although the losses were limited in opening exchanges. In the premier index, companies with a China exposure littered the top of the fallers’ table, including the miners, while the oils followed some overnight weakness in Crude to also drift lower. There was a slither of interest in defensive stocks, which mitigated some of the markdowns, leaving the FTSE 100 ahead by just 0.8% so far this year.

The FTSE 250 has also been under recent pressure as the ramifications of likely further interest rate rises from the Bank of England accelerate the possible move towards a recessionary environment, with growth remaining marginally positive but hard to come by. The FTSE 250 has given up any previous gains in the year to date and is currently down by 0.3%.