Market snapshot: oil majors and broker downgrades are main focus

As expected, there were few fireworks Friday, with Wall Street closing early post-Thanksgiving and with significantly lighter trading volumes. 

Even so, the main indices posted their fourth consecutive week of gains in what has been a strong month following the September and October jitters. The most recent narrative among investors is that interest rates have peaked and that the aggressive Federal Reserve hiking policy has had limited impact on an economy which continues to show few signs of bruising. The debate has now switched to whether the Fed will have engineered a soft landing and, if not, the timing of any interest rate cuts which would be necessary to revive the economy.

• Learn more: SIPP Portfolio Ideas | How SIPPs Work | Transfer a SIPP

In the meantime, the focus will switch to the vitally important cog in US economic growth, the consumer. Early indications are that Black Friday has seen sales which have grown year-on-year, although somewhat cautiously given an increasingly frugal outlook in households. Background inflation is still ahead of Fed targets, while there has been a notable increase in credit card spending after Covid savings evaporated. Nonetheless, the hope will prevail that, as is traditionally the case, Black Friday will herald the beginning of an active sales period leading up to Christmas.

There are some important economic updates on the way this week, which should provide further colour to the state of the nation in economic terms. A second estimate on GDP growth on Thursday will be followed at the end of the week by the Personal Consumption Expenditures report, the Fed’s preferred measure of inflation. Taken together, an inflation number which continues to drift lower while leaving GDP relatively unaffected is the Goldilocks scenario, and could also relieve some tension as markets move into the final month of the year.

Indeed, given the turbulence which has inevitably tested markets, the main indices have held up strongly, with the Dow Jones ahead by 6.8%, the S&P500 by 18.8% and the Nasdaq 36.2% in the year to date.

Asian markets remained mixed, with Japan and China continuing to go their separate ways for the time being. A beleaguered property sector in China shows few signs of resolution, despite some attempts at stimulus from the authorities and a further suggestion to lenders that they show some tolerance towards souring loans.

In contrast, Japan continues to benefit from rising tourism, investor interest and improving exports as the economy drives ahead. For the moment, the Bank of Japan is not concerned about an inflation rate which is ticking higher, predicting that price pressures are likely to abate very shortly, leaving the door open for a continuation of its loose monetary policy.

With other global markets giving the UK little to go on, the main indices again showed few signs of life in opening exchanges. The FTSE 100 moved lower, with an oil price which has drifted given OPEC uncertainty over the rearranged and upcoming meeting putting some pressure on the majors, with BP (LSE:BP.) and Shell (LSE:SHEL) weaker.

• Two FTSE 100 shares tipped to go much higher
• Three mining stocks to buy for 2024
• Nick Train buys new holding that’s 'done nothing for five years'

Broker downgrades to index heavyweight AstraZeneca (LSE:AZN) as well as Entain (LSE:ENT) also weighed, although there was some unconvincing strength across a couple of the retailers, likely on the back of some early reports on Black Friday activity. Rightmove (LSE:RMV) shares also jumped on improved guidance. The FTSE100 is still keeping its head above water so far this year – just – although the 0.2% rise could evaporate very quickly.

The FTSE250 briefly ventured into positive territory at the open, although buying interest was limited. The index remains down by 2% in the year to date after a relatively positive opening quarter. However, as seen by a main index which has also been unconvincing of late, it is a recognised part of investment life that confidence is slow to build but quick to shatter.