Market snapshot: stocks react to latest Trump decision

Investors are clearly not yet immune from the noises emanating from the White House, and US markets drifted as the President continues to shoot from the hip.

The constant attacks on Federal Reserve Chair Jerome Powell have, given the most recent data, proved largely unwarranted. His latest salvo came in the form of the dismissal of Governor Cook for alleged improprieties in obtaining mortgage loans, although the legality of the move remains unclear. More broadly, however, investors remain concerned that by continually nibbling at the edges, the credibility and independence of the central bank could be slowly eroded, which in turn would be negative for market, consumer and business confidence.

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In addition, it appears that Trump’s tariff appetite remains undiminished. New threats emerged on countries which have digital taxes, which could have implications on the EU for example, and seems to take direct aim at jurisdictions which he considers to be favouring fines for the likes of Alphabet through Google.

Despite all the noise and a marginal market dip yesterday, record highs remain in sight for the main indices. Last week’s comments from the Fed Chair were not explicit on reducing interest rates at the September meeting, but were enough to keep hopes high, with around 85% of investors clinging on to expectations of a reduction.

Meanwhile, the technology sector remains squarely in focus on a number of fronts, not least of which will be the upcoming update from NVIDIA Corp (NASDAQ:NVDA). The shares have added 30% so far this year despite some doubts over the sustainability of interest in the AI trade and expectations are stretching ahead of the numbers. 

Elsewhere, Intel Corp (NASDAQ:INTC) shares built on the previous day’s gains after it had been revealed that the US government had taken a 10% stake. This move could yet prove to be the thin end of the wedge if, as suspected, it is the early part of a strategy to create a sovereign wealth fund. Such further substantial buying pressure could, of course, put another plank under the performance of markets generally.

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In the meantime, the performance of those main indices remains positive. In the year to date, the Dow Jones has risen by 6.4%, outpaced by gains of 9.5% and 11% for the S&P500 and Nasdaq respectively.

Following a lacklustre performance overnight in Asia as a result of US weakness, the premier UK index was initially unable to build on its latest record closing high, although the FTSE100 is ahead by a robust 14% in the year to date. 

Weaker economic data coupled with broker downgrades weighed heavily on retailers such as Kingfisher (LSE:KGF) and Primark owner Associated British Foods (LSE:ABF), while Prudential (LSE:PRU) dipped ahead of its half-year numbers which are due after the closing bell today. 

Bunzl (LSE:BNZL) was a rare ray of light, as bargain hunters sought the stock despite lower half-year profits. The resumption of the share buyback programme came alongside two further acquisitions, as the group continues its bolt-on strategy. Nonetheless, the shares have declined by 25% this year, not least due to a previously weak trading update in April.

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There was also a fresh reminder that while inflation is easing, it is far from dead. Overall shop prices rose by 0.9% in August, up from 0.7% in July, with food inflation rising from the previous month’s 4% to 4.2%, pouring cold water over the Bank of England’s ability to reduce interest rates further for the time being. 

While one set of economic data cannot be taken in isolation, it nonetheless adds to concerns that easing may not be on the horizon at a time when the domestic economy is clearly in need of a boost. Despite the economic headwinds and a lower open, the FTSE250 has seen the benefit of increased interest in the UK as an investment destination, adding 6.5% so far this year.