Market snapshot: US revisions and Lloyds keeps car finance provision under review

US markets began the month on the back foot as signs emerged that the economy may not be as bulletproof as had been assumed.

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The non-farm payrolls report revealed that 73,000 jobs had been added in July, as compared to the 100,000 consensus estimate. Of more concern, however, were the revisions to previous months’ data, with June’s figures dropping from 147,000 to a paltry 14,000 and May’s from 125,000 to just 19,000.

The revisions imply that the economy is indeed beginning to suffer the effects of the tariff pronouncements and that equally a softening jobs market is becoming entrenched – and has been for some months. Bank stocks suffered as result on fears of impaired loan growth, while bellwethers such as Caterpillar Inc (NYSE:CAT) (ahead of its update this week) also drifted lower.

The development also shines new light on the Federal Reserve. Previously content to sit on its hands until it could comfortably gauge any inflationary effects of the tariffs, it will now need to question whether the economy is in need of some stimulus. Indeed, the odds for a September rate cut spiked after the release to over 85% in contrast to a sharp fall earlier last week as inflation alone was seen as the driver for Fed action or indeed inaction.

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More pressure came as Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL) reported, with the latter estimating a tariff hit of $1.1 billion (£828 million) sales in the current quarter. The shares slipped by some 2.5%, while Amazon fell 8% after cautionary guidance on the current trading situation. Further colour will be provided this week with another raft of company updates across various sectors, with the likes of McDonald's Corp (NYSE:MCD), The Walt Disney Co (NYSE:DIS) and Pfizer Inc (NYSE:PFE) among the blue-chips reporting.

In the meantime, the main indices remain comfortably ahead so far this year, despite having been top sliced on Friday. The Dow Jones is up by 2.5%, the S&P 500 by 6% and the Nasdaq by 6.9% even after a broader tech sell-off, which shaved 2.2% from the index at the end of last week.

UK investors saw the opportunity to buy on the dip following the US weakness, which had led to a mixed session for Asian markets. The premier index opened comfortably higher, reversing some of Friday’s weakness. The gains were broad based, with the banks attracting some interest, especially Lloyds Banking Group (LSE:LLOY), which spiked by more than 6% following a Supreme Court decision on motor finance redress which could remove some uncertainty, although the group is maintaining its previous provision as a precaution.

International Consolidated Airlines Group SA (LSE:IAG) received a belatedly positive reaction to its Friday update, with the overall gain leaving the index up by 11.3% so far this year, with the FTSE 100 increasingly the star of the show on the global stage given its established and defensive characteristics.

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On the domestic front, it is anticipated that there will be a boost in the form of a further 0.25% cut to interest rates on Thursday to 4%, although the impact of such a move will take several months to result in any meaningful effect on the economy.

In contrast to the developing signs of weakness as the effects of previous budgetary measures affect hiring and investment decisions as well as consumer confidence, the FTSE 250 still remains ahead by 5.6% with investors still seeing value within a relatively cheap market compared to global peers.