Interactive Investor

Market snapshot: records on Wall Street, but London tracks Asia

26th August 2021 08:11

Richard Hunter from interactive investor

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There are reasons for investors to be optimistic, so why are share prices lower in London?

Markets continue to climb the wall of worry with indices on both sides of the pond scaling record highs.

For the second consecutive day in the US, the S&P500 and Nasdaq closed at record highs, and in the case of the former, for an extraordinary 51st time this year.

Further progress on vaccine approvals has bolstered sentiment as the US fights to control the Delta variant, while the substantial fiscal and monetary stimulus programmes underpin economic growth. Almost 90% of companies beat expectations in the second-quarter reporting season and, although there are some concerns over whether earnings growth has peaked, the immediate outlook for corporate America stands to benefit from a recovering economy.

Volumes are currently light, exacerbating price movements, but at the same time there is clearly a war chest of capital waiting to be deployed by investors. In the year to date, the Dow Jones has now added 15.7%, the S&P500 19.7% and the Nasdaq 16.7%.

The more domestically focused FTSE250 may spend its time in the shadow of the FTSE100 premier index, but has been outshining its larger compatriot.

Bolstered by a steadily recovering UK economy, M&A activity and some recently pleasing results, the FTSE250 is also nudging record highs, having topped the level of 24,000 for the first time yesterday. With international investors continuing to run the slide rule over UK stocks in general, there are clearly bargains to be found away from the larger and more obvious counterparts within the FTSE100. The FTSE250 has now risen by 16.8% in the year to date, trumping the progress of the FTSE100, which is currently ahead by 10.2%.

A tepid opening to trading has seen investors choosing to react to further weakness in Asian markets, as opposed to the further strength of Wall Street. From a technical perspective, the usual slew of FTSE100 stocks being marked ex-dividend on a Thursday also weighs on the index.

Even so, the progress of the major indices is reflective of the general move towards a return to normality, with the imminent Jackson Hole symposium providing an opportunity for the Federal Reserve to assure investors that the punch bowl will not be taken away just yet.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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