Market snapshot: stocks lack conviction

There was some respite for US markets on the back of a slightly weaker oil price, but any enthusiasm seems to have been short-lived.

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Comments from the US Treasury Secretary suggested that the US is allowing Iranian oil tankers through the Strait of Hormuz, while the President remained optimistic that a coalition of US allies would soon be announcing safe passage for other ships. The news took around 3% from the oil price, which nonetheless remained just over the psychologically important $100 per barrel.

Elsewhere, the CEO of NVIDIA Corp (NASDAQ:NVDA) made claims at a conference that he could see $1 trillion of demand for AI chips through to next year, double his estimate from the same meeting last year. This lifted Nvidia shares by 1.6%, which due to its sheer size was the main driving factor for the benchmark S&P500’s 1% advance, even though the shares remain down by 3% so far this year.

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Subsequent comments from the President that the proposed coalition was not yet in place, and some lukewarm comments from several European allies, threw some cold water on prospects for a renewal of supply, and the oil price advanced by more than 3% as a result to its current level of around $104 per barrel.

As such, and in something of a sign of the times, US futures are currently pointing down by around 0.5%, which would erase some of yesterday’s bounce. Traders were also quick to point out that volumes were well below average during the Monday session, implying that any buying pressure was lacking true conviction.

The brief reprieve shaved some of the losses so far in the year to date for the main indices, where the Dow Jones, S&P500 and Nasdaq have fallen by 2.3%, 2.1% and 3.7% respectively in the year to date.

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The two-day Federal Reserve meeting begins today, but the likelihood of an interest rate cut is non-existent as priced in by consensus, as the central bank joins many of its peers in adopting a wait and see approach until the inflationary impact of the oil price can be properly assessed.

With Asian markets mixed overnight and Dow futures pointing lower, the FTSE100 opened unconvincingly, failing to stray far from the flatline in early trade. There was some cautious buying among the utilities after a weaker session yesterday, while a broader mark-up offset some of the weakness being seen elsewhere.

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Prudential (LSE:PRU) shares slipped slightly ahead of full-year numbers which will be released later tonight UK time, and where the group’s assertion that it has reached an inflection point in its growth of free surplus capital generation, in turn resulting in higher shareholder returns, will be tested.

The cautious grind higher leaves the FTSE100 ahead by 4% in the year to date in contrast to many of its global peers, although the FTSE250 has given up its previous gains and stands 2% lower. It remains to be seen whether there is pent-up demand for equities in general to recover to former highs this year, which in any event will remain constrained until there is clear progress towards a resolution of the Middle East conflict.