There is increasing evidence of both strengthening demand as well as labour shortages in certain sectors.
The UK continues its measured recovery, with the latest jobs report from the Office for National Statistics indicating further progress.
As expected, the unemployment rate fell marginally to 4.7%, but with 953,000 job vacancies and averagely weekly earnings having surged by 8.8%, there is increasing evidence of both strengthening demand as well as labour shortages in certain sectors. The next reports will give an even stronger indication of where the economy stands as the government furlough scheme comes to an end, although the current demand and supply imbalance for labour may take some of the strain.
However, UK markets remain under pressure given wider global concerns. In particular, the previous news from China negatively impacted oil and commodity stocks on fears of a slowdown in demand, while shares such as Burberry Group (LSE:BRBY) slumped following the weakening retail sales number from the region.
The main indices remain ahead in the year to date, with the FTSE100 having added 10.3% and the FTSE250 15.3%. Despite progress which has been possible due to a combination of overseas investor interest, strong corporate earnings and some brisk M&A and IPO activity, the current pinch point of geopolitical and recovery concerns may linger in the shorter term.
After a shaky start, the US markets shrugged off the Chinese concerns which had affected other markets, with some switching into defensive plays and out of growth, pushing both the Dow and the S&P500 ahead, with the Nasdaq suffering a small decline.
Further colour will be added later to the strength of this consumer-centric economy, with retail sales numbers due as well as updates from the bellwethers Walmart (NYSE:WMT) and The Home Depot (NYSE:HD). With the minutes of the latest Federal Reserve meeting and comments from Chair Jerome Powell also imminent, investors will be searching for signs of the latest thoughts on whether the tapering of stimulus is moving ever closer.
In addition, inflation remains another key metric, with the Fed likely to reiterate their view that the current upward trend being seen on softer comparatives remains a temporary effect.
In the meantime, this stimulus and a raft of strong quarterly earnings have conspired to leave the main indices strongly ahead in the year to date, with the Dow Jones up by 16.3%, the S&P500 19.3% and the Nasdaq 14.8%.
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