American jobs data will be a big focus over the next few days. Our head of markets has the latest.
Markets are treading water ahead of more economic data points which will further inform the inflation debate.
One of the drivers of market jitters around inflationary pressures has been bottlenecks in the labour market, and over the next two days the US jobless claims number and the non-farm payrolls reading will provide new evidence on the state of the nation.
The oil price is another driver of concern, as there does not seem to be any excessive supply coming on stream for the moment from the major producing countries. The price is ahead by 39% in the year to date, partially driven by an anticipated spike in demand, and the effect of this inevitably puts further upward pressure on prices.
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In the meantime, there has been a cautious move towards defensive stocks as investors position themselves for what could be a volatile couple of trading sessions. Depending on the strength of the latest economic numbers, there will be more questions posed on the Federal Reserve’s easy monetary policy. While a rise in interest rates remains unlikely, a tapering of stimulus could signal the beginning of some policy tightening.
Set against these concerns, the major indices have nonetheless continued to progress, and in the year to date the Dow Jones is up by 13%, the S&P 500 12% and the Nasdaq 6.7%.
UK in focus
Meanwhile, the UK is quietly coming back into vogue as an investment destination.
Despite the recent strength of sterling, normally an inhibitor to the premier index where the majority of earnings come from overseas, the FTSE 100 has for the most part continued its steady progress. It is currently up by almost 10% in the year to date, while the more domestically focused FTSE 250 has added 12%.
Even at these levels, the indices are seen as undemanding on valuation grounds, particularly in comparison to other major global markets, and the general warming of sentiment could underpin further progress.
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