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 (LON:BNZL) shares fell after a trading statement that was largely in line with expectations, but persistent inflationary pressures and some potential profit taking after a 17% 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 (LON:PRU) given its own exposure to Asia, there was only one way to go. The second day of weakness leaves the FTSE 100 ahead by 6% this year, and some 3% away from the May high which some had hoped would be an inflection point.
Ahead of the UK interest rate decision later this week, the Bank of England’s decision was further muddied by average earnings growth of 5.2% being reported for October, from a previous 4.4% and well ahead of the expected 4.6%, while the unemployment rate was unchanged at 4.3%. The wage moves are inflationary at a time when the battle was close to being won, and this release adds further probability that the central bank will leave interest rates to run at current levels before reviewing the situation in the new year.
Nasdaq Powers to New Highs in the US
In what has been the central theme of the year, another rally in technology stocks saw the Nasdaq power to a new record high.
Technology staples such as Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL) and Tesla all saw buying interest, while Broadcom (NASDAQ:AVGO) continued its own recent spike with a further gain of 11%, heralding a gain of 130% for the year. A rare exception was market darling Nvidia (NASDAQ:NVDA), whose shares dipped by 1.7%, although this did virtually nothing to derail its performance in this year alone, with the stock having risen by 174%.
More broadly, investors are awaiting the latest Federal Reserve decision tomorrow, 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% 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% this year, with the S&P 500 having added 27.3% amid any number of highs over the last few months, with the Dow Jones also ahead by some 16%.
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.