UK markets opened at a brisk pace, helped along by some froth in the advertising sector, which lifted WPP (LON:WPP) shares by more than 3%. Reports of a $30 billion US merger between Omnicom and Interpublic read across to the UK company, whose share price has risen by 20% so far this year on improved prospects despite the overarching concerns of new big tech and AI-driven mandates.
The latest jobs report in the US ruffled few feathers, with investors seeing enough evidence to remain mostly convinced that a December rate cut is still on the cards.
Non-farm payrolls rose by 227000, ahead of the expected 200000 jobs which were expected to have been added. Equally, there were signs of emerging cracks as the previous month’s basement number of 12000 was only revised up to 36000, and as the unemployment rate rose from 4.1% to 4.2%.
These slight signs of contradiction allied to an economy that is still steadily growing given the impetus of consumer spending and wage growth, might usually lead to the conclusion that interest rates need not be tampered with at the present time. In addition, the potentially inflationary actions of the President-elect from January onwards could also lead the Federal Reserve to keep its powder dry. Nonetheless, a rate cut this month is basically priced in with thoughts of a slowing pace of rate reductions now spilling over to next year.
The release of the latest Consumer Price Index reading later this week should clinch the deal providing that there are no shocks to the consensus. A monthly increase to headline inflation of 0.3% is expected, annualizing to 2.7% from 2.6%, with core inflation excluding food and energy prices estimated to remain unchanged at 3.3%.
In the meantime, the sanguine sentiment to which investors have seemingly become accustomed was enough to propel both the S&P 500 and Nasdaq to fresh record highs, although the Dow slipped slightly in the trading session. In the year to date, each of the main indices has made significant progress, with the Dow Jones ahead by 18.4%, the S&P 500 by 27.7% and the Nasdaq by an extraordinary 32.3%, largely predicated by the ongoing march of mega-cap technology stocks.
Asian investors were more cautious overnight, as Chinese inflation slowed to a gain of 0.2% in November against estimates of 0.4%, dampening hopes that the raft of stimulus measures so far has gained little traction among sluggish domestic consumers. Increasingly exasperated investors will now turn their attention to this week’s Central Economic Work Conference, where it is hoped that further fiscal support will be forthcoming from the authorities.
In Japan, the market was modestly higher after the latest reading of GDP rose by 0.3% in the third quarter, although down from 0.5% in the previous three months. However, the current focus for investors is on interest rates, where tightening is expected in an attempt to keep inflation under control while also lending some support to the Japanese yen, which has struggled against the US dollar for most of this year.
Elsewhere, the potential for new Chinese stimulus lifted the miners as well as stocks with a largely Asian exposure, such as Prudential (LON:PRU) and Standard Chartered (LON:STAN) in the premier index and Burberry (LON:BRBY) in the FTSE 250. The early gains for the main indices were steady rather than spectacular as has been the case for the year as a whole, with the FTSE 100 now having added 7.8% and the FTSE 250 7.2% in the year to date.