Market snapshot: testing times as investors await data and Nvidia report

After a highly shaky start, US markets regained some poise as the session wore on, with the Nasdaq ending slightly ahead.

At this very early stage, futures suggest that the tech-based index will continue its recovery today, with limited gains for the S&P500 and Dow Jones, both of which ended the week lower. The most recent volatility has stemmed from concerns over both the level of capital investment in AI as well as the punchy valuations which the connected stocks now command.

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In terms of the S&P500 and Nasdaq, the performance of these indices this week will to a large extent be at the mercy of NVIDIA Corp (NASDAQ:NVDA), whose latest report is due on Wednesday against a backdrop of hugely elevated expectations. Whatever the results, they are likely to be market moving and could well set the scene for the investor outlook for the remainder of the year.

Elsewhere, as the government cranks back into action after the end of the shutdown, comments from the White House that some of the economic data which had been due during the impasse may not be released at all added to concerns on the next interest rate decision from the Federal Reserve.

Investors had been pricing in an almost certain cut in borrowing costs, particularly given the weakness of the labour market and a levelling of inflation. But the likelihood has now fallen to less than 50% given the possibility that the Fed may decide to wait until full visibility has been restored, which could well spill over to next year.

Ahead of what will be another testing week, the main indices are still in good shape despite increasingly skittish investor sentiment. In the year to date, the Dow Jones is ahead by 10.8%, with the more tech-driven S&P500 and Nasdaq having added 14.5% and 18.6% respectively.

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Tension in Asia – unusually not involving the US on this occasion – drove markets lower overnight, as geopolitical relations between China and Japan worsened following a growing dispute over Taiwan. With Chinese authorities warning its citizens not to travel in Japan in light of a potential military response should it decide to attack, investors were kept on edge as shares in retail and travel companies bore the brunt of the selling pressure.

For the UK, inflation numbers later in the week will be of some significance to the Bank of England. A patently deteriorating labour market is already in evidence, and should there be some sign of inflation having peaked in September with a softer October reading, the door would be ajar for an interest rate cut in December. That being said, the largest potential hurdle may come from any Budget fallout next week, where the immediate trajectory of the economy could be affected depending on the severity of any measures introduced by Chancellor Rachel Reeves.

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Meanwhile, the premier index arrested some of its recent decline although failed to make any meaningful progress at the open. Burberry Group (LSE:BRBY) and to a lesser extent HSBC Holdings (LSE:HSBA) were under pressure given the tension in Asia, while the beleaguered WPP (LSE:WPP) rose on some vague bid speculation arising from weekend reports.

In an otherwise featureless set of opening exchanges, the FTSE100 remains up by an impressive 18.7% so far this year, albeit 2% lower than its recent record peak given the wider uncertainty which has caught some investors in the headlights.