Market snapshot: nervous start for FTSE 100

Despite bullish signals in the US, all eyes will be on a lockdown update over here today.

The bulls are currently in the driving seat in the world’s largest market, but the road ahead remains fraught with potential hazard.

The US economy is under the spotlight for good reason, particularly as consumer-dependent as it is. There have been increasing calls for the need for a fiscal stimulus package, without which the recovery could stutter or even turn into recessionary territory, with some large corporates already having announced job losses.

That focus will remain this week, with a slew of economic data expected, such as the consumer price index, retail sales and some readings on manufacturing. At the same time, the third-quarter reporting season begins in earnest with the banks leading the way, where any outlook comments for the final quarter of the year will be as important as the third-quarter numbers themselves.

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Even against these ongoing concerns, the current mood has improved somewhat and US cyclical stocks had a day in the sun on Friday. Combined hopes of a fiscal stimulus and cure for Covid-19 brought them into play on a medium-term view, on the basis that the economy could be in a rather stronger place a year down the line.

As a result, markets rallied and the Dow Jones has moved again into positive territory, now standing up 0.2% in the year to date, alongside the other indices which continue to improve also. The S&P 500 index is now ahead by 7.6% and the Nasdaq by 29% in 2020.

The UK economy will also be under scrutiny as further lockdown measures are expected to be announced in a week where Brexit negotiations are coming to a head, with no obvious signs of agreement yet in evidence.

For the premier index, the US banking reporting season should give some read across indications to the UK banks which report towards the end of month. Of particular interest will be any further hikes in bad debt provisions and, where applicable, the performance of the investment banking units.

Elsewhere within the index, pressure remains on the likes of the oil sector, and the 20% decline of the FTSE 100 in the year to date is evidence that a recovery in fortunes is long overdue, although far from visible.