Market snapshot: record high for US indices

UK stocks are playing catch-up after Friday's US jobs data provided further food for the bulls. 

The recovery trade is at full throttle, with the major US indices hitting new record highs.

Monday was the first chance for markets to react to the bumper non-farm payrolls figure from Friday, where a hugely better than expected 916,000 jobs were added, while the unemployment rate also declined to 6%. Coupled with a strong services activity report, which also jumped to a record high, and with the vaccination rollout also advancing strongly, gains across the board reflected the renewed optimism.

Alongside the impending effects of the major stimulus packages on spending and infrastructure, the strength of these economic data also raises hopes that any number of solid readings will now become the order of the day, as the nascent US economic recovery moves into full growth mode.

The concerns of inflation and, in turn, an early spike in interest rates have subsided for the moment, with Treasury yields holding steady, allowing the recently beaten down growth stocks, and big tech in particular, to also participate in the general wave of buying activity.

Two major indices hit record highs as a result, with the Dow Jones now ahead by 9.5% in the year to date and the broader S&P 500 by 8.6%. Meanwhile, the Nasdaq also shook off recent selling pressure to stand up by 6.3% so far this year.

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In turn, today is the first chance for European markets to react to this fresh wave of optimism after an extended weekend, and indeed to the possibility that global economies will be lifted by a recovery which is expected to be led by the US in the first instance.

For the UK, where a further easing of lockdown restrictions was confirmed by the government, prospects increased for sectors such as the miners, banks, retailers and hospitality to participate in a potential surge in economic activity.

The FTSE 100 index, currently ahead by 5.6% in the year to date, is continuing to benefit from both the general optimism as well as increasing international investor interest.