Market snapshot: Records in the US, Entain plunges in UK

A powerful mix of corporate and economic data sent more records tumbling as investors scrambled to join the rally.

Both the benchmark S&P500 and the Dow Jones hit new highs at the end of last week, bringing their gains in the year to date to 21.9% and 13.7% respectively. Meanwhile, the Nasdaq also moved ahead bringing its cumulative gain for the year to 22.2%, although the index remains some 1.7% away from the record levels it hit in July. 

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The initial impetus came from a Producer Price Index reading which further allayed fears that inflation was still an issue. The number was unchanged on a monthly basis, as compared to expectations for a rise of 0.1%, while on an annualised basis the PPI fell from 1.9% to 1.8%.

With data currently going the Federal Reserve’s way, there are increasing hopes that a soft landing for the economy is now looming large. A further nudge to growth is likely to come in November, with an interest rate cut of 0.25% almost fully priced in.

Further fuel for the bulls came in the form of a strong opening to the quarterly reporting season, as two major banks pleasantly surprised investors. Wells Fargo & Co (NYSE:WFC) shares rose by 5.6% on profits which beat estimates, while JPMorgan Chase & Co (NYSE:JPM) added 4.4% having beaten both revenue and profit expectations, and also upping its annual interest income guidance.

The bar has now been raised as the banking sector remains in sharp focus this week, with updates from the likes of Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), The Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS), as well as numbers from UnitedHealth Group Inc (NYSE:UNH), Netflix Inc (NASDAQ:NFLX) and Johnson & Johnson (NYSE:JNJ).

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In Asia, the hand-wringing continued as investors weighed up comments from the Chinese authorities on Saturday, which promised much but delivered little in terms of detail. Whereas there had been hopes for numerical proof of the government’s intentions, possibly to the tune of almost $300 billion, promises to “significantly increase” debt was the extent to which the Minister of Finance would be drawn.

At the same time, the economy inevitably remained in focus, with the release of consumer and wholesale numbers showed a weakening in prices for both, underscoring the current level of weak consumer demand domestically. There were some gains for the market overall and the property sector in particular given hopes that any stimulus will be meaningful, although concerns over Chinese demand weighed on the oil price.

Later this week, there will be further evidence on the state of the economy with the release of the third-quarter GDP number, which will show how the cumulative performance is holding up against the 5% target for the year as a whole.

The mixed messages drove prices lower in the UK in opening exchanges, with the likes of Prudential (LSE:PRU) slipping on the Chinese overhang. There was also some inevitable pressure on the oil majors, while Rolls-Royce Holdings (LSE:RR.) dipped on reports that it was suffering delays in delivering some critical engine components to British Airways.

Meanwhile, ahead of a trading statement later in the week, Entain (LSE:ENT) shares plummeted 12% (and former FTSE100 constituent Flutter Entertainment (LSE:FLTR) by over 7%) on reports that the government was planning a tax raid of up to £3 billion on the sector in an effort to repair some of the nation’s finances.

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The week will also bring some important economic releases into view, most notably unemployment and inflation numbers which could muster particular significance as the much-awaited Budget draws nearer, let alone informing the Bank of England on its next interest rate move in November, where on balance a further 0.25% cut is still expected.

In the meantime, the FTSE100 has added a respectable 6.7% so far this year and the FTSE250 5.4%, although the former has been unable to negotiate the hurdles which have kept the premier index from retracing the record highs achieved in May.