Interactive Investor

Market snapshot: stocks regain some poise

3rd December 2021 08:06

Richard Hunter from interactive investor

Wall Street finished well ahead and UK shares are in positive territory on Friday. Our head of markets brings us up to speed and looks at today's big events.

Markets have regained some poise at the end of a difficult week which was marred by Omicron fears and an increasingly hawkish outlook from central banks.

Investors switched into optimistic mode following the earlier Federal Reserve suggestion that the end of the tapering programme, and therefore the beginning of interest rate hikes, could come earlier than expected next year. Alongside no immediate change to its supply plans at OPEC, there is a growing feeling that future variants may not, after all, be enough to derail economic policy per se.

Even so, the volatility index remains elevated in anticipation of further details on the variant, while the oil price has continued to whipsaw on unclear demand in the coming months. Despite the latest bout of volatility, oil remains up by 37% in the year to date, although some way off its more recent highs.

The next indication on the strength of the US economy will come in the form on the non-farm payrolls figure later. After than a stronger than expected reading of 531,000 jobs being added in October, the expectations for the November outturn is a figure of 550,000. As ever, a stronger reading would tend to add weight to any Federal Reserve decision to accelerate tapering, while a lower figure would once more muddy the waters.

Despite the volatility, the performance of the main indices remains in rude health, with the Dow Jones having added 13.2% in the year to date, the S&P500 21.9% and the Nasdaq 19.3%.

Asian markets were rather more subdued overnight, as the announcement that the ride-hailing company Didi would delist from New York reignited concerns on both the fractious relationship between the US and China, as well as the general spectre of tech regulation.

UK markets were prepared to take their lead from Wall Street, however, with a break in hostilities signalling a stronger open.

There was some strength in oil stocks on the back of the oil price rebound and banks on a general move towards more cyclical sectors. There was also some respite for airline and airline-related stocks. Although restrictions have been tightened, travel remains possible and there will be an element of tourists who will stick with their plans.

Wider concerns remain as to whether the airlines will bear the brunt of future reactions to mutations and variants, although for now investors are looking ahead to what should prove to be a busy summer period regardless.

Volatility is likely to remain in place for the remainder of the year, with regular switches between the risk-on and risk-off trade as further news emerges. In the meantime, the UK indices are holding on to their creditable gains11, with the FTSE100 ahead by 11.2% and the FTSE250 by 11.4% in the year to date.

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