Market snapshot: waiting for an important week to unfold

Measured but renewed interest in semiconductor stocks offset marginal losses elsewhere, enabling the tech-exposed S&P500 and Nasdaq indices to creep higher again to new records.

Market volatility and movement was crimped, as investors wait for the rest of the week to unfold for more meaningful pointers on the economic direction of travel. Federal Reserve Chair Jerome Powell is set to testify before Congress today and tomorrow and his comments on recent data will be closely monitored.

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Although there have been signs of a slowing jobs market, contracting growth and cooling inflation, the Fed could well stand by its guns on the “higher for longer” narrative, until such time as it is comfortable that inflation is not only on a path to its 2% target, but also that the likelihood of its reigniting is minimal.

This will then feed into the Consumer Price Index print on Thursday, where headline inflation is expected to have risen by 3.1%, down from the previous month’s 3.3% level. Such a reading would consolidate the current market opinion, if not necessarily that of the Fed, that an interest rate cut will come in September.

At the same time, the earnings season begins in earnest towards the end of the week, with estimates of a 10% increase in aggregate earnings per share expected in the second quarter, as compared to a rise of 8.2% in the first. The release of bank earnings could also confirm whether any cracks are beginning to appear in the face of higher interest rates, most notably with regard to consumer debt default levels.

In the meantime, the main indices continue to look comfortable despite the many unanswered questions. In the year to date, the Dow Jones has added 4.4%, while the S&P500 and Nasdaq have raced ahead by 16.8% and 22.6% respectively.

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In Asia, Japan’s Nikkei index also rose to fresh highs, bolstered by the rise of semiconductor shares in a nod to Wall Street. Despite data from the previous day which underlined the fragility of the consumer, a generally weaker yen has boosted prospects for the main index based on the cheapening exports which follow. Chinese shares also edged higher following the previous day’s shipping sector shock.

In the UK, BP (LSE:BP.) shares fell by more than 3%, erasing its year-to-date gains. The group announced an expected $2 billion impairment alongside a weaker oil trading result for the quarter. The lower refining margins come despite an oil price which has risen by more than 11% this year, with Shell shares dropping by 0.4% in sympathy.

More positively, warm broker comments on prospects lifted both Kingfisher (LSE:KGF) and Rio Tinto Registered Shares (LSE:RIO), while the housebuilding sector remained in focus as Vistry Group (LSE:VTY) announced pre-tax profit which had risen after a strong performance in the first half.

Alongside a potential tailwind arising from the new government’s focus on new homes and affordability, the sector has been in focus of late, with Vistry shares having risen by 42% this year. The news read across to Persimmon (LSE:PSN), which added 1.2% for a cumulative performance of a positive 7.1% move in 2024 and also comes ahead of a full-year trading statement from Barratt Developments tomorrow.

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At the headline level, the main indices were little changed in early exchanges, leaving the FTSE100 ahead by 5.9% and the FTSE250 by 5.5% so far this year, with both seeing the benefit of warming overseas investor sentiment and underpinned by average dividend yields of 3.6% and 3.3% respectively.