Written by Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown
The US is enjoying a more positive set of trading sessions, with the S&P 500 and Nasdaq composite finishing up 1.5% and 2.3% respectively on Thursday, to achieve their fourth consecutive day of gains.
The Dow also posted gains of 1.1%. Gains were spearheaded by energy stocks, including Exxon Mobil, Chevron and Occidental Petroleum, who were rewarded by the market as the oil price rebounded. A read-across from Asian giant Samsung also buoyed the tech sector across the pond, after it released its best April-June quarter in three years.
Even more importantly, global markets are hotly anticipating a key US jobs report today. This is likely to be a double-edged sword for investors. While the data is expected to show another round of strong hiring, which is inherently positive, it also paves the way for policymakers to hike interest rates even more aggressively. This is an upside-down situation whereby the announcement of a stronger economic foundation could be viewed as a catalyst for increased market jitters.
While the general tone is so far positive, this has fed across to the FTSE, with the FTSE100 holding broadly steady following yesterday’s modest gains. Boris Johnson’s departure hasn’t been viewed as a catastrophe for UK markets, and instead has largely been shrugged off. The bigger question now is who the next prime minister will be.
Traders will want to know if a new leader is likely to lend support to the idea of further tax hikes. On the other hand, a reduced tax environment may well be expansionary for the economy, but does pose the risk of inflation lingering for longer. Either way, it would appear that as Boris shut the door to Number Ten after his speech yesterday, the door also slammed shut on the potential for market panic.
Brent crude is holding at around $105 a barrel, as recession fears rumble on. Such an event sees demand for the black stuff slip away, as economies skid to a crawl. There is of course also ongoing supply disruption, which is what’s stopping the price from having perhaps a more severe reaction to economic rumblings.