Our head of markets runs through some of last night's results out of the US. He also looks at the issues currently driving sentiment both over there and in the UK.
Investors are riding the wave of surging company earnings, as the earnings reporting season continues to outpace expectations.
In the US, there were strong tech and related earnings from the likes of United Parcel Service (NYSE:UPS) (strong ecommerce demand), Alphabet (NASDAQ:GOOGL) (an upbeat outlook for Google advertising) and Microsoft (NASDAQ:MSFT) (high demand for its cloud business, especially on the back of the emerging hybrid working model). Facebook (NASDAQ:FB) shares dipped, however, as it claimed that Apple’s (NASDAQ:AAPL) new privacy changes will affect its digital business.
At the same time, there was a slightly defensive tone, as evidenced by some moves into utility and healthcare stocks, as investors continue to ponder the outcome from the current inflationary and labour market pressures. Even so, the buying pressure was widespread if slightly muted and the resultant rising tide was enough to lift both the Dow Jones and the S&P500 to record closing highs.
In the year to date, markets have provided a strong return despite the various challenges of the immediate outlook, with the Dow Jones up by 16.8%, the S&P500 by 21.8% and the Nasdaq by 18.2%.
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A similar picture is emerging in the UK, with generally stronger earnings washing through despite the well-publicised issues of supply chain blockages, labour tightening and rising costs.
Underpinned by strength in cyclical sectors over recent days, such as the housebuilders, miners and oils, the UK’s premier index is still being seen as undervalued compared to many of its international peers. However, sentiment remains guarded as the prospects of monetary tightening loom large both in terms of stimulus withdrawal as well as potential interest rate hikes in the UK.
With some spending plan details already released, the gaps will be filled when the Budget is announced later today. Traditionally any impact from the measures announced tends to move sterling, although there could be some market impact in terms of specific sectors and perhaps general sentiment.
In the meantime, despite some weakness in early exchanges after a positive recent run, the main indices remain on a firm footing, with the FTSE100 ahead by a creditable 12.5% in the year to date, and the FTSE250 by 13%.
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