Market snapshot: US performance and UK data

Our head of markets studies latest price moves on Wall Street and the latest numbers for borrowing and retail sales over here. 

Investors recovered some poise overnight after a bruising few trading sessions which reflected any number of concerns.

In the US, sentiment improved after a strong jobless claims number, while a rotation out of cyclical and back into technology stocks underpinned gains for the Nasdaq and S&P500. 

However, some of the hangover from weakness in commodities and oil prices lingered on, with the crackdowns in China adding to the mix. In particular, perceived weakening economic growth is being exacerbated by the tightening of restrictions for both the technology and the luxury goods sectors, while the presence of the Delta variant is also contributing to the general market woes in the region’s markets.

Further clues are anticipated during the Jackson Hole symposium next week, with Federal Reserve chair Jerome Powell likely to provide the latest thoughts of the US central bank on the current environment, and with investors seeking more clarification on the tapering stance.

Ahead of another testing few days, the main indices are maintaining the progress made in the year to date, with the Dow Jones ahead by 14%, the S&P500 by 17.3% and the Nasdaq by 12.8%.

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UK borrowing remains extremely elevated given the financial demands of the pandemic, although the latest update shows a relative decline. A larger than expected level of tax receipts is also a mitigating factor, but as the various government support schemes wind down, the residual debt will be in need of some repair.

Meanwhile, a disappointing retail sales number saw a decline of 2.5%, as compared to an estimated rise of 0.4% month on month, with the year-on-year figure also missing expectations, coming in at a rise of 2.4% as against an estimated 6%. Even so, economic progress remains measured and heading in the right direction, as many of the shackles imposed during lockdown should enable businesses to benefit from the pent-up demand and improved consumer sentiment in the coming months.

This has fed through to some strength in retail stocks in early trade, although the slight uptick in Burberry Group (LSE:BRBY) shares cannot mask a decline of 12% on the week for the stock, following the negative news coming from the Asian region as a whole of late. The revised higher bid for Morrisons (LSE:MRW) has also boosted supermarkets in general as takeover froth spills into the sector.

However, sentiment remains fragile for the moment, and with lighter trading volumes during August, more market volatility is extremely possible. In the meantime, the major indices are also holding firmly onto their gains in the year to date, with the FTSE100 ahead by 9.4% and the FTSE250 by 15.4%.