Market snapshot: regaining some poise

US markets have now largely erased the losses from early August, where recessionary fears sent stocks into a brief tailspin.

The latest sense of calm follows some economic data which ticked the boxes both of cooling inflation and a resilient consumer, bringing thoughts of a soft landing back into view. The recovery rally has seen the S&P 500 and Nasdaq register gains for the last eight days running, with market darling NVIDIA Corp (NASDAQ:NVDA) having risen by 31% since its August low. Pleasing retail sales and jobless claim numbers have soothed sentiment, while inflation continues to subside. On the corporate front there was also some solace from Walmart Inc (NYSE:WMT) last week, whose strong earnings added to the belief that the knee-jerk recessionary market reaction may well have been overdone.

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Although largely overtaken by subsequent events, the release of the Federal Reserve minutes tomorrow will nonetheless garner investor attention. Of more topical significance, however, will be chair Jerome Powell’s comments at the Jackson Hole Symposium on Friday, where clues will be sought on the very latest Fed thinking. The current consensus is that an interest rate cut in September is now all but nailed on, with some debate over the size of the reduction. A move of 0.25% has regained its position as being most likely, with thoughts of a cut of 0.5% now subsiding given the most recent data, although the release of non-farm payroll numbers in early September will be pivotal, as proved to be the case earlier this month.

In the meantime, the main indices have regained their poise and are currently nudging towards the record highs recorded earlier in the year. More volatility remains a distinct possibility given lighter trading volumes and therefore less ability to absorb shocks, although this is a week which is relatively free of major corporate or economic releases. The Dow Jones has now added 8.5% in the year to date, with gains of 17.6% and 19% for the S&P 500 and Nasdaq respectively.

As has often been the case over recent months, Asian markets were mixed overnight largely driven by domestic issues, Japan’s Nikkei index rose after a bumpy session which highlighted the fact that this was a market which saw the most volatility during the recent turmoil. The Bank of Japan’s hawkish moves on interest rates was later tempered by comments from officials which played down the likelihood of further hikes until such time as the market settled.

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In China, meanwhile, there was an underwhelming reaction to the news that benchmark lending rates would be left unchanged. The news represents the latest impasse between investors and the authorities, with the former group still calling for more aggressive stimulus to improve the economic outlook, especially within the real estate and consumer sectors, However, Chinese officials tend famously to take a much longer term view on the general direction of economic prospects, which in turn can often exasperate investors looking for a quicker fix.

The absence of any obvious catalysts also led to a tepid opening in the UK, with the main indices struggling for direction after a buoyant few trading sessions. There was some fairly lacklustre early buying interest in the mining stocks, although a drifting oil price overnight weighed slightly on the oil majors BP (LSE:BP.) and Shell (LSE:SHEL). BT Group (LSE:BT.A) paused for breath after a recent run which has seen its share price rise by 36% over the last six months, while the airlines attracted some attention despite the ongoing conflicts which have tended to disrupt travel in parts during the crucial summer season.

The FTSE 100 is now ahead by 7.8% so far this year and just over 1% away from the record high recorded earlier in the year. The FTSE 250 is up by 7.5% over the period, with the more recent strength in sterling also having some effect on repatriated earnings, particularly for the premier index.