No Santa rally for UK markets while shares in US tech giants storm ahead: Richard Hunter
In what has been the central theme of the year, another rally in technology stocks has seen the Nasdaq power to a new record high. Technology staples such as Alphabet, Apple and Tesla all saw buying interest, while Broadcom continued its own recent spike with a further gain of 11 per cent, heralding a gain of 130 per cent for the year.
A rare exception was market darling Nvidia, whose shares dipped by 1.7 per cent, although this did virtually nothing to derail its performance in this year alone, with the stock having risen by 174 per cent.
More broadly, investors are awaiting the latest Federal Reserve decision today, ahead of which the retail sales release later today could provide some colour as to the current level of consumer spending around Black Friday and the traditionally crucial festive decision.
The near certainty of a 0.25 per cent cut has seen speculation moving on to the accompanying comments, where the Fed’s outlook next year could be market moving.
Previously, four small cuts had been expected, but the residue of a strong economy and some potentially inflationary actions by the new administration could lead to the central bank sitting on its hands as it surveys the new economic scene.
The fresh record for the Nasdaq means that the index has now gained 34.4 per cent this year, with the S&P500 having added 27.3 per cent amid any number of highs over the last few months, with the Dow Jones also ahead by some 16 per cent.
Asian markets saw none of the festive spirit, with both the Japanese and Chinese markets falling. The decline in Japan was mitigated by some strength in technology shares, where the lead from Wall Street and SoftBank’s joint announcement with the President elect that it would be investing $100 billion in US projects for the next four years underpinned tech prices.
Meanwhile, China remains the subject of investor exasperation and shares fell further. The weakness of the previous day’s economic releases were still resonating as any stimulus measures have yet to take effect, and in the meantime the lack of domestic demand and a weak property sector continue to weigh.
In the UK, any Santa rally remains notable by its absence. The premier index slipped once more, led by weakness in the oil majors and most of the mining sector as prospects for the Chinese economy appear to have stalled at present.
Bunzl shares fell after a trading statement which was largely in line with expectations, but persistent inflationary pressures and some potential profit taking after a 17 per cent rise in the share price over the last six months took precedence.
With the pharmaceutical giants also slipping in the overall markdown, as did Prudential given its own exposure to Asia, there was only one way to go. The second day of weakness leaves the FTSE100 ahead by 6 per cent this year, and some 3 per cent away from the May high which some had hoped would be an inflection point.
Ahead of the UK interest rate decision later tomorrow, the Bank of England’s decision was further muddied by average earnings growth of 5.2 per cent being reported for October, from a previous 4.4 per cent and well ahead of the expected 4.6 per cent, while the unemployment rate was unchanged at 4.3 per cent.
The wage moves are inflationary at a time when the battle was close to being won, and adds further probability that the central bank will leave interest rates to run at current levels before reviewing the situation in the new year.
Richard J Hunter is Head of Markets for interactive investor