A number of key markets in Europe and Asia were quiet on Friday, with the FTSE 100 slipping 0.0056% to 7,120 and Asian stocks gave away ground.
“US non-farm payroll figures could put a bit of life in the markets later today, with forecasts for 925,000 jobs to have been added in July and unemployment at 5.6%. A worse than expected figure might trigger a positive market reaction as it would suggest the economy is not overheating,” says Russ Mould, investment director at AJ Bell.
“Conversely a better-than-expected figure might trouble investors if it suggests the economy is racing ahead, which would stoke fears of interest rate hikes happening sooner than currently guided by the US Federal Reserve.”
With the markets now entering the quiet summer period, investors will be looking back over their year-to-date performance and creating a strategy for the autumn onwards.
US stocks continue to be the place to be for many, with the S&P 500 index up 19.7% year to date, closely followed by the Dow Jones which has advanced 16%.
“Joe Biden’s $1 trillion infrastructure plan will provide impetus, together with the fact that businesses and consumers are busy spending, all creating a tailwind for economic growth. Equally there is also a headwind in the form of inflationary pressures which is starting to eat into corporate profit margins. For now, investors seem happy to stick with the US market in the search for investment returns,” said Mould.
The UK market has also done well, especially compared to its performance over the past decade.
“The FTSE 250 has been the star performer, up 14.1% so far this year, helped by a swathe of takeover activity as private equity and overseas trade buyers start to capitalise on the value still to be found among UK stocks,” Mould said.
“The FTSE 100 has lagged the UK’s mid cap index, but still delivered an 8.2% gain year-to-date. That’s slightly better than the historical annual returns seen from the market and we still have the best of five months to go.”
Asia has been the laggard, with a regulatory clampdown in China putting investors off the region. Hong Kong’s Hang Seng index has fallen 4.6% so far this year, and China’s SSE index is down 1.3%.
“Japan’s Nikkei 225 index has bucked the negative trend in Asia with a 2.1% gain since the start of January, but hardly a reason to celebrate. The IMF recently downgraded its 2021 economic forecast for Japan as it struggles to deal with Covid. It now expects 2.8% growth this year, the weakest of all the advanced economies.”
