US markets rose to varying degrees, with some early bargain hunting in areas away from the technology sector ahead of what could be a new era of growth following the election.
Nvidia (NASDAQ:NVDA)'s price action ended with a whimper rather than the expected bang, as the shares ended just 0.5% higher. With bears pointing to a mildly disappointing revenue outlook for the current quarter, bulls responded to the fact that the pace of growth yet again exceeded expectations, and the resulting honors were largely even. Elsewhere in the technology space, Google-owner Alphabet (NASDAQ:GOOGL) dropped by almost 5% on antitrust concerns, with the Justice Department suggesting that the company should be forced to sell off its Chrome browser on competition grounds.
The rising concentration risk and disproportionate power of the “Magnificent Seven” has also been under recent investor scrutiny, focused by the possible boost to the economy following the President’s inauguration in January. While any measures will inevitably take time to wash through, investors are already scouring areas such as smaller cap and cyclical stocks that could benefit from the expected stimulus, with the Russell 2000 index and the likes of Goldman Sachs (NYSE:GS), Home Depot (NYSE:HD) and Caterpillar (NYSE:CAT) all attracting buying interest during the session.
Any such rotation did little to arrest the onward march of the main indices, however, with the Dow Jones currently up by 16.4%, the S&P 500 by 24.7% and the Nasdaq by 26.4% in the year to date.
Asian markets had differing fortunes overnight, with the Chinese and Hang Seng indices still reeling from the double whammy of investor disappointment over the stimulus measures announced so far being compounded by concerns of the potential US tariffs and trade restrictions which could be coming its way.
Japan’s Nikkei index, by contrast, was broadly higher as investors pondered over the latest inflation data, which slowed to 2.3% in October from 2.5% the previous month. however, core inflation ticked higher which, alongside a more recent rebound in consumer spending and ongoing yen weakness could prompt the Bank of Japan to raise interest rates further during its meeting next month.
Unsurprisingly underwhelming retail sales in the UK were the focus of early attention in the UK, where the numbers showed a decline of 0.7% in October, annualised to an increase of 2.4% compared to 3.2% in September. Budget uncertainty was held up as the reason for consumers holding fire on spending and sterling immediately weakened as a result. The upcoming and important festive season will be an interesting test in this space and may come too late to increase the likelihood of another interest rate cut, which is now off the table until the new year according to consensus. The weakness of this reading will be tested again over the coming month, let alone the pressure following the Budget which has resulted in the proposed measures being widely lambasted by the retail industry.
Further strength in the haven asset of gold on escalating geopolitical tensions lifted the likes of Endeavour Mining in early trade within the premier index. A sprightly open was peppered with a broadly based mark-up of shares, with a better-than-expected consumer confidence report underpinning some strength in the property sector, and with the oil majors edging higher following some overnight strength in the oil price. The FTSE100 is now ahead by 6.1% in the year so far, and it remains to be seen whether the positive momentum of the last couple of trading sessions will be maintained, particularly given the potential boost of a further weakening of sterling.