Market snapshot: US and UK earnings front and centre

UK retail sales have grabbed headlines today, but focus will quickly switch to big company announcements both sides of the Atlantic over the next week.

Investors continue to take heart from a strong opening to the third-quarter reporting season, with the S&P500 again hitting a record closing high.

Big tech and FAANG stocks in particular will come squarely into focus next week after Netflix (NASDAQ:NFLX) reported strong earnings, with updates due from Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Google-owner Alphabet (NASDAQ:GOOGL), as well as another tech bellwether in the form of Microsoft (NASDAQ:MSFT).

Despite tough comparatives against what was a bumper second-quarter reporting period, corporate America has so far generally been able to exceed expectations, even though any misses are likely to be punished.

More broadly, there is further evidence of a tightening labour market, as jobless claims fell to a 19-month low. Another theme which remains central is persistent inflation, which has led investors to assume that some form of monetary tightening is imminent. While interest rate rises are, by consensus, still in the long grass, the likelihood of tapering in November seems now to be fully expected.

For the moment, however, the main indices are still grinding higher, with the Dow Jones up 16.3%, the S&P500 21% and the Nasdaq 20.2% in the year to date.

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Overnight news that Chinese property company Evergrande would be making an interest payment due on one of its bonds to avoid defaulting lifted sentiment, which has also fed through to the UK in opening exchanges. This in turn has resulted in some small relief for mining shares, which have been under pressure in recent sessions given the large exposure to China. 

Meanwhile, UK retail sales dipped once more in September, as opposed to the expected marginal gain, as consumers continued to eschew the high street in favour of an escalating trend of socialising which has become a factor since the easing of lockdown restrictions.

Online sales remain elevated in a post-pandemic switch in behaviour, and the widely reported fuel shortages which began in late September fed through to a 2.9% rise in sales. Attention will now begin to switch towards the festive season and whether the situation can be recovered, alongside the further pressures of supply chain blockages and labour shortages.

Next week is also one of importance in the UK as the third-quarter reporting season accelerates, with HSBC Holdings (LSE:HSBA), Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG) all aiming to emulate the strong example set by Barclays (LSE:BARC). Elsewhere, there are also updates from Whitbread (LSE:WTB), GlaxoSmithKline (LSE:GSK), Shell (LSE:RDSB) and WPP (LSE:WPP), each of which will make a contribution to the understanding of the current economic picture on the ground.

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The main indices approach the end of the month in fair health, with the FTSE100 having risen by 11.4% in the year to date and the FTSE250 by 11.9%, with both still underpinned by continuing international investor interest on valuation grounds.