Market snapshot: stocks at full throttle again
After significant losses, stock both overseas and at home have staged an impressive rebound. ii's head of markets analyses latest developments and the big events to watch out for this week.
29th July 2024 08:27
by Richard Hunter from interactive investor
US markets forged ahead to end a turbulent week on a strong note, following a benign inflation print which gave fresh impetus to the likelihood of an imminent interest rate cut.
While no change is expected at the Federal Reserve meeting this week, the odds are now strongly in favour of a cut in September, with more recent economic data including Friday’s Personal Consumption Expenditures (PCE) adding to investors’ conviction that one or even two more could follow before the end of the year.
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The PCE rose 0.1% month on month, annualising to 2.5%, both in line with estimates. The non-farm payroll figure on Friday will be the next set of important data, with 185,000 jobs expected to have been added in July, compared to 206,000 the previous month.
The reporting season continues apace this week, with updates from the likes of McDonald's Corp (NYSE:MCD), Boeing Co (NYSE:BA), PayPal Holdings Inc (NASDAQ:PYPL), Chevron Corp (NYSE:CVX) and Exxon Mobil Corp (NYSE:XOM).
Arguably of more significance will be updates from four more members of the “Magnificent Seven” – Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc Class A (NASDAQ:META), Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL) – who will be wishing to avoid the bath given to Tesla Inc (NASDAQ:TSLA) and Alphabet Inc Class A (NASDAQ:GOOGL) last week after disappointing numbers set against a high bar of expectations.
In the meantime, evidence remains of an ongoing move into smaller-cap stocks in anticipation of a first interest rate cut, with the Russell 2000 index having had a strong run over recent weeks. While slightly off their highs, the main indices have nonetheless put in a convincing performance so far this year, with the Dow Jones ahead by 7.7%, the S&P 500 by 14.4% and the Nasdaq by 15.6%.
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Asian markets also rallied, with investors looking forward to a busy week which will include the Bank of Japan’s (BOJ) monetary policy meeting as well as an expected announcement from China. This provides the teasing prospect of further stimulus from Chinese authorities against a backdrop of announced measures which have so far failed to whet the appetite of overseas investors. The BOJ meanwhile, is expected to raise interest rates once more to 0.1%, while also signalling a reduction in its bond-buying programme.
This week in the UK, the pace is equally frenetic, with the earnings season at full throttle. Updates from BP (LSE:BP.) and Shell (LSE:SHEL) will be among the highlights, in addition to releases from the likes of Diageo (LSE:DGE), Next (LSE:NXT), International Consolidated Airlines Group SA (LSE:IAG) and Rolls-Royce Holdings (LSE:RR.). For the banks, HSBC Holdings (LSE:HSBA), Standard Chartered (LSE:STAN) and Barclays (LSE:BARC) will round off the season, hoping to repeat the strong lead given so far from Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG), where creditable half-year performances were boosted by a strong second quarter.
There will also be some focus on the Bank of England, which will reveal its latest interest rate decision on Thursday. At present, the consensus is evenly split between a cut and a no-change decision, with the latest economic data having seemingly been unable to provide a definitive steer. A cut at some point this year is nevertheless expected, although the timing remains on the flip of a coin.
In early exchanges, the premier index grabbed the bullish baton from overseas, with a broad mark up which included some buying interest in stocks which have struggled most recently such as Prudential (LSE:PRU) and BP.
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Pearson (LSE:PSON) provided a headwind, however, as it posted lower half-year pre-tax profits although maintaining full-year guidance, with the shares dropping by more than 4%, while Reckitt Benckiser Group (LSE:RKT) was under strong pressure after a busy week including the announcement of the sale of some of its higher profile but non-core brands, while some litigation concerns also persist.
The gains for the index leave the FTSE 100 ahead by 7.6% this year, with the FTSE 250 continuing its strong recovery and now up by 8.7% after what had previously been a testing few months.
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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.